The cryptocurrency is generally known as virtual currency or digital assets, is one of the most forward-looking markets and is expected to reach a size of $1.40 billion by 2024. Millennials, baby boomers, entrepreneurs, as well as small and medium-sized enterprises are interested in buying crypto because of the safe nature of digital assets and their transactions.
Despite a positive outlook, the reservations surrounding the rapid spread of Covid-19 outbreak is impacting the global economy and enthralling the people with fear. If you are planning to pursue a career in cryptocurrency, here is everything you need to know about the digital asset sector amid Covid-19 fears.
7 Reasons Explaining The Downfall Of Cryptocurrency Amid Coronavirus Pandemic
1. Value Of Cryptocurrency
As the Coronavirus outbreak rolls on, a positive correlation has been observed between the spread of infectious disease and an increase in crypto volume and market cap. After this initial trend, it was implied that bitcoin cryptocurrency is a stable source of securing liquidity. People were excited about the advantages of bitcoin and looking for unconventional ways of using cryptocurrency. However, predictions of extended lockdowns and global Covid-19 cases hitting 50,000 results in a sudden shift in the trend. People started to assume the cost of unemployment and business shut down while investors spooked. Many industrialists are foreseeing the possibility of a second recessionary wave.
2. The Pandemic Effect
Technically, cryptocurrency has helped the global financial system to overcome a few key challenges. However, the spread of Covid-19 disease, oil price war and the performance of stock market fuel panic across the globe and crypto market is no exception. The lucrative crypto market was not immune to such pressure, and the results were shocking. In Feb, the bitcoin prices reached its new heights with a market worth of $10,502. However, after a month, the bitcoin price sharply fell overnight and reaches a low of $3791. This means that the value of bitcoin has decreased by almost 50%.
3. Drop-In Price Means Less Capital
The fall in cryptocurrency prices means less capital. Here’s how. When the World Health Organization announced Coronavirus spread like a pandemic, digital risk assets begin to drop. The stock market faces its toughest days while the prices of bitcoin dropped. On the other hand, corporate debt, commodities, and real estate collapse severely.
4. Lesson For Regulators
The Covid-19 impact on the cryptocurrency market draws several critical implications for the regulators. Given the fact that the newborn cryptocurrency sector is highly interlinked with the financial market, one key finding is that cryptocurrency markets should be viewed as a foundation of systematic risk for the conventional financial systems in times of crisis.
5. Raising Capital Is Harder Than Ever
Since the Initial Coin Offering (ICO) investments fall 95% and the market collapsed entirely amid the Covid-19 outbreak, start-ups are now looking towards venture capital to acquire funds. However, the uncertainty that comes with the Covid-19 has become much more frustrating over the past weeks. Since venture capital companies are giving off funds, investors are more interested in hearing about the business plan and evaluating them more critically. But in this pandemic situation, it is nearly impossible to organize in-person meetings.
6. Crypto Conferences Postponed
When the deadly infectious diseases cross the border of China, it becomes common knowledge that the virus is no longer the headache of Chinese. As the disease spread to other countries, the bitcoin conferences and blockchain meetups have also been canceled or postponed. The only option left for them is to host a virtual event. Over the past few years, the cryptocurrency market has been overwhelmed with conferences and meetings, and that is why a pause is not so damaging for the community for a short period.
7. It Isn’t The End Game
Considering the on-going Covid-19 pandemic and deteriorating macro-environment situation worldwide, it can be said that the crash in the crypto market was pretty much expected. However, it doesn’t mean that the cryptocurrency market has no future. Despite the sadistic downfall of the market, industrial experts believe that appropriate fiscal policies and active role of government can help the sector to revive and deal better with global crises in the future.
Despite the hurdles, investors have high hopes from the cryptocurrency market. Cryptocurrency is a substitute to government-issued fiat money, and undoubtedly it will recover soon in the post-coronavirus era.
John William is a Finance Manager at Assignment Assistance, a trusted platform that offers ‘best assignment writing service UK’ to undergrads and grads. His decade of experience allows him to excel in his current role where he’s committed to educating people on the latest digital trends and their impact on industries.