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The Crypto-Covid Year – How a Pandemic Helps Cryptos

crypto-covid-19

September 23, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Coronavirus has been brutal on the economy. Whether transport, entertainment, hospitality, and more, are all down. The crypto world, however, seems to be on an upturn. This article looks into how important the period has been on the cryptos; 

Bitcoin Status as Safe Haven Established 

The role of Bitcoin as a safe haven has been a matter of contention. Gold has been the primary secure investment. The position which now looks like Bitcoin's. Even before the pandemic, the cryptocurrency was already building the profile. This was evident during a threatening USA-China trade war. The coin gained value while the other stocks were plummeting. 

The start of the pandemic, however, came with mixed feeling. The coin started by moving the same direction as the traditional stock markets. It reduced from the highs of around $7k to reach the lows of $3k. It, however, recovered almost immediately. It has since then been gone through a sustained. It even beat some of its historical resistance levels of $10k. 

It has within the period established itself as a safe haven. Investors can rely on it during the uncertain economic movements. According to Cointelegraph.com, while Bitcoin is built on a peer-to-peer cash system, it has become more of a security. Its increase in value has attracted many traders to it. It has also outperformed several other assets. It has beaten some of the most extended powerful assets like real estate, gold and S&P 500.

Bitcoin also works best as a safe haven due to its decentralized nature. It is not under the whims of any central authority to control. 

The digital currency is also scarce. It has a maximum market supply cap of 21 million coins. The scarcity is one of its high value pushes. The more it attracts new users with a static supply, it becomes highly valuable. 

Diversification 

If there is a lesson from the pandemic is the need for diversification. Every trader understands the risk of putting “all eggs in one basket.” The need for investing in different assets ensures security when one sector goes down. Bitcoin has become the best alternative for those looking to diversify investments. 

Diversification comes with more than just security. It also helps in ensuring more gains compared to a single asset portfolio. The cryptocurrency economy is also too big to still allow for diversification. The economy has over 5,000 cryptocurrencies. The different coins come with various vital points. Traders can compare the extra coins to settle on the best. Still, coins like Ethereum, Ripple and the other altcoins have the upper hand. 

In understanding diversification, Bitcoin has gained a correlation with traditional assets. It works such that it has predictable movements with some of these assets. Of all the assets, it correlates most with the S&P 500. 

There are also prospects of the traditional economy regaining. The government has in place stimulus packages. It also provides for various resumption plans after the pandemic. The regular traders will still look the way of the traditional stocks. The correlation, however, means that both the economies can rally at the same time. 

Bitcoin as a reserve 

All these new establishments in the crypto world make it essential in the financial world. It is fast becoming the most reliable currency and asset. Several countries and other entities are looking to it as the central reserve

US dollar has been the main reserve currency for most countries. However, the coronavirus pandemic has impacted it like the other fiat currencies. The dollar has lost value, losing confidence in the same period. Already some countries are looking for Bitcoin as the best alternative. 

Before the crypto, the world would be stuck in a defective fiat economy. Bitcoin is now the liberation the economy needed. 

The fiat currency operates at the mercy of central banks and governments. They decide on the supply to control inflation. Bitcoin, however, is a peer-to-peer transaction platform with no central authority. 

The value of the Bitcoin is a reflection of the prevailing economic situation. 

The market takes into effect any changes and possible future occurrences. It serves as the best alternative reserve given its free-market position. 

Companies are also starting to consider Bitcoin for reserve investments. One of the notable companies to take bitcoin is the MicroStrategy. The successful company turned over 65% of its assets into Bitcoin. The move is likely to ignite a significant market movement.  

The Role of Crypto During a Pandemic 

While Bitcoin seems to have gained from the pandemic, it has also underlined its usefulness. The crypto companies have not been on the sidelines during the campaign. Instead, they have been actively looking for avenues in helping to bring back things to normalcy. 

The several Bitcoin initiatives have been successful in underlining its importance in the economy. One of such has been the Binance, Crypto Against Covid initiative. It has so far gained over 180 donations totalling to 46.93 BTC. The company changes the crypto to fiat the use it to provide medical supplies. 

The Italian Red Cross also launched a crypto fundraiser. The one-month event help to purchase a medical facility and protective wear for the medical workers. There are also other several Bitcoin fundraisers over the period. 

The success of the Bitcoin fundraiser shows how much the coin can be useful. It shows that it can replace the fiat currency without missing the functionality it is known for. 

Bottom Line 

The whole traditional economy has had a rough coronavirus pandemic period. Most of the industries are trading at the lowest. It is only the crypto world that seems to be on the upturn. The period has at last confirmed the coin as an ideal safe haven. 

The period has also helped set the coin as the best alternative investment. It has become so useful in the same period. Ultimately, it looks to replace the US dollar as the reserve currency. 

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