Cryptocurrency and COVID-19: lessons and future

The COVID-19 pandemic has slowed down many aspects of the economy and shook up the banking system. Never before have banks turned the "printing press" on that power: more than $2 trillion were issued to stabilize the markets.

What is happening to Bitcoin during the pandemic? Now that the first half of the year has passed, we can look back and draw conclusions.

Investors and Crypto Enthusiasts Expectations

Unlike central banks that allow governments to print money according to their will, bitcoin is independent. There are no income models and no support measures for economic assets.

In the 2010s, bitcoin enthusiasts guessed that digital currency would balance traditional financial systems and become a hedge against inflation. However, absolute independence did not work out.

The reality in the light of economics

Like other assets, cryptocurrency does not live in a vacuum: it is affected by economic and political factors. They affect both supply (the activity of miners and the behavior of currency holders) and demand (interest in bitcoin among investors). The balance of supply and demand determines the price of Bitcoin and altcoins.

The flow of fresh fiat money is fueling demand in the stock markets. Therefore, with the background of the deflation of economic assets, we can see inflation of financial assets — and digital currencies too.

As it was predicted by crypto enthusiasts, the popularity of bitcoin in 2020 has grown several times compared to the last decade. But the more the system develops, the more technical capacity and the larger the investors coming into, the stronger Bitcoin’s dependence on global processes. Including economic crises and pandemics.

Cryptocurrency market landscape in 2020

  1. Dynamics. According to The Block, from February to March, the volume of investments down 61%. The indicators recovered later but the overall investment trend is clearly negative: from February to July, the number of transactions is falling.
  2. Geography. The amount of transactions in Asia fell by half, while in North America it grew slightly. In Europe, the volume of transactions fell insignificantly.
  3. Leaders. The Digital Currency Group was the most active during the pandemic: it invested in five blockchain projects. Coinbase Ventures and Binance also stood out: the exchange bought the popular service CoinMarketCap. Citibank and Mastercard also invested in crypto.
  4. Trends. According to analysts, in 2020, the way of investing in blockchain projects has changed: there are fewer transactions in the early stages; investors interest mainly in mature projects.

The coronavirus pandemic did not become a disaster for the crypto community, but did not pass without a trace. Activity is now recovering gradually and returning to the 2019 rate.

According to Mark Fleury, founder of financial company Two Prime, “We will likely witness a surge in money flows into crypto markets, similar to what we saw in the equity markets”.

If you are ready to catch a trend and start making big money, read our article “How to attract funds as a successful trader”: it gives you tips on how to find a reliable partner.