2020 has been a wild ride for anyone invested in, or even just watching, the Bitcoin and crypto market in general.
The rate of the first cryptocurrency rose by 150% amid the spread of the coronavirus and continues to increase. Perhaps the epidemic will end this year (although one cannot say for sure). How will this affect Bitcoin? Let’s try to figure it out.
The crypto market has shown significant growth since the beginning of 2020 amid the coronavirus spread; since January 2020, BTC has risen in price by more than 150%.
The virus will not disappear by magic, and the epidemic will decline when a significant number of the world’s population falls ill or herd immunity is formed thanks to vaccines and the number of people who have been ill.
The end of the pandemic and COVID-19 can affect the crypto market in different ways. On the one hand, Bitcoin has strengthened in the status of a defensive asset during the crisis due to the weakening of national currencies. Therefore, those who invested in cryptocurrency during the crisis, upon its completion, can start selling it. On the other hand, Bitcoin belongs to risky assets, the demand for which may increase as the economy stabilizes.
But still, many experts are inclined to believe that the end of the pandemic is a positive factor for the cryptocurrency market. Most likely, it will retain or even strengthen its value as a defensive asset in terms of an instrument for hedging foreign exchange risks.
The end of the pandemic would likely mean economic recovery and increased inflationary risks. The dollar has already been devalued by 20%, and towards the end of the pandemic, such sentiments will only intensify.
Cryptocurrencies can also be positively affected by the gradual recovery of the labor market: people will have more money to spend, which plays into the hands of digital assets.
When the global economy re-enters the development phase after a period of stagnation amid isolation and declining incomes, capital inflows into risky assets can be expected. They include cryptocurrency.
Bitcoin still cannot be called a defensive asset. If investors start selling such assets at the end of the pandemic, this should not directly affect cryptocurrencies.
Do not forget about an important fact: during the crisis, major companies as Tesla, MicroStrategy, Galaxy Digital Holdings, etc. have already invested in cryptocurrency, and so many others continue to show their interest. With the global economy stabilization, institutions can increase their shares in risky assets. As a result, cryptocurrencies should only benefit from the removal of restrictions.
A less pleasant scenario for Bitcoin is also possible
However, negative scenarios also seem logical. The pandemic has become one of the growth drivers of the whole crypto market, so its end may negatively affect digital assets’ value. The capital invested in Bitcoin and other coins may go into fiat currencies, stock markets, and assets that have fallen in price during the pandemic.
A decline in the crypto market could provide an excellent opportunity for a wider range of investors to purchase digital coins at delightful prices. Besides, an increase in Bitcoin investment on the part of institutional investors means their long-term interest in this asset and an increase in its share in the structures of classic investment portfolios. Therefore, you should not expect a protracted decline in the cryptocurrency market with the end of the pandemic, especially considering the interest of neobanks, such as Paypal, in using Bitcoin for the purchases on their platform.
The one thing that seems inevitable is that the wild ride of 2020 will definitely be repeated, so buckle up!
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LATOKEN crypto exchange does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Like other assets, cryptocurrency is subject to market risk. Please do your own research and trade with caution.