February 25, 2020, Coinbase (leading crypto exchange) announces a codified multistage disease mitigation plan into company policy. But why? Novel coronavirus, which originated from the Wuhan region of China, was slowly engulfing the people from all across the world. Despite the fact that the World Health Organisation was announcing the outbreak of COVID-19 or coronavirus as pandemic on March 11, 2020, the global economy had already experienced the slowdown. The traditional markets were already plunging, the prices of crude and Brent oil were falling, and the crypto markets started coming down from $10000 since the virus influenced the people from China, Italy and Iran. Nonetheless, the influence of corona on crypto cannot be ignored when the prices of bitcoin were increasing day by day before the medical emergency.
Crypto Community Clapped Before The Corona Crawl!
Bitcoin price was progressing and was up around 50% since the beginning of 2020.
The bitcoin price touched around $7200 at the early evening of January 01, 2020, and within a month smashed the barrier of $10,000 and raised to $10,127 (all-time high since 2017). Bitcoin prices surged highly in the second week of February (though corona had already hit China, Italy and Iran till then).
Crypto enthusiasts and traders were expecting the prices of bitcoin to climb and the crypto markets to be bullish after observing the day by day increase in prices. The significant rally (Jan-Feb) in the crypto space came after December 2017 when the price of bitcoin spiked up to $20,000. (Corona’s impact on cryptocurrencies not even know!)
Willy Woo, a partner at bitcoin and cryptocurrency hedge fund Adaptive Capital stated that Fundamental investment is not only driven by retail investors but also by the institutional investors or whales of the crypto space, are backing the toll of $10,000.
Relationship of Bitcoin and Gold revived this year as bitcoin moved hand in hand with the safe-haven assets amid the US-Iran war and the influence of corona on crypto was not seen majorly.
Till the virus hit China only, everything was fine in crypto space (though the mining process slowed down, prices were still ok). Singapore based Exchange, Huobi had an uptick in both trading volumes and its active users until corona hit other countries. Also, Malta-based crypto exchange Binance experienced a similar condition as that of Huobi.
Bitcoin was moving up with its reputation as a “safe haven asset” amid the financial crisis until the trends changed from “bitcoin price” to “coronavirus”.
Crypto community was expecting the flourishing bitcoin halving event (expected in May 2020), which will have half the mining rewards, would be able to trigger the market all-time high and might blow another wave of massive investment.
Analysts at Arcane Research analysed that Google trends were continuously rising for “Bitcoin halving” in those weeks.
But, the expectation and assumptions related to the prices of bitcoin started dwindling, global markets observed the free fall due to the outbreak of dreadful coronavirus and the influence of corona on crypto became observable.
Corona Chained Crypto Community! (Influence of Corona On Crypto)
Cryptocurrency or bitcoin always take the investors and traders to the roller coaster ride due to its highly volatile nature. The recent plunge in bitcoin came (continued) amid the continuous bullish markets since January 2020. In the wake of global pandemic COVID-19, bitcoin was expected to act as the safe-haven asset, but it failed to stand in times of turmoil in the traditional financial markets. The influence of corona on crypto can be explained briefly as :
Bitcoin might be called a safe haven asset due to its feature of decentralisation( not affected by the worldwide economic turmoil), followed the closed path with traditional regular markets and became frenemies with the alluring commodity, gold.
Rate of mining the blocks or block time or hash rate dramatically decreased. Due to the delayed upgradation of mining machines, diversion of power supply(needed for mining) to the biotechnological research and temporary shut down of mining equipment manufacturers, mining process started losing traction.
Institutional Investors or whales of the crypto space initiated drawing out their investments from the crypto space and further worsened the conditions of the markets.
“Corona Coin”, one of the morbid jokes that started in the crypto space. The value of the coin based on the number of reported deaths.
Trading volume in the major exchanges started falling at the drastic rate signifying the lost confidence in the digital assets amid the chaotic global market and the outbreak of coronavirus.
Despite the situation of the crypto space and influence of corona on crypto, the price of bitcoin and other crypto coins are relatively higher than the traditional markets. Some of the features which are helping in the sustenance of bitcoins can be:
Decentralised nature of the cryptocurrency and blockchain technology facilitated the crypto community at the time of crisis. Tech workers associated with sophisticated projects are not facing difficulties in working from home and developing the products for crypto space. Announcement of Quantitative Easing by the Federal Reserve to inject liquidity in the market might not be affecting bitcoins negatively but would prove as the opportunity for digital assets.
Volatile nature of bitcoins made them perfect for the speculative markets. This feature is presently attracting the retail investors who have started diversifying their portfolio, which might aid in pulling up the prices of bitcoins (worst fall on March 12, i.e. $3850) amid the corona outbreak.
Bitcoin is a borderless form of currency that facilitates faster and secured transactions. The COVID-19 have compelled the people to “stay where they are”, hence many of them are not able to send the remittances across the border. The bitcoins can facilitate the transfer of money with negligible transaction fees.
In the end, success or condition of the bitcoin and crypto markets depends upon the community who make up the crypto space, investors and developments associated with cryptocurrency services and products and the influence of corona on crypto will certainly vanish away.