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Impact Of Covid-19 On Cryptocurrencies

By November 16, 2020May 9th, 20235 minute read

Both the financial and business world has suffered a major impact due to the rapid spread of the novel coronavirus. With businesses closing down around the globe and unemployment reaching its peak, we are slowly proceeding towards a worldwide recession. But the crypto industry has received mixed responses, with more and more people opting for cashless methods for transferring and storing value. This has added a solid impetus to the adoption of digital currency around the globe. 

However, the mining of cryptocurrencies has also been adversely affected by the virus wreaking havoc in Asian countries like South Korea and China, which hold the lion’s share of the overall mining power. Such changing dynamics have left crypto investors utterly confused. But we are going to clear some common confusion by offering a brief overview of the impact of COVID-19 on the crypto market so that you can make the right investment call.

The investment markets have become highly unstable amidst the uncertainties of our economy and pandemic-related lockdowns. This has impacted every single sector ranging from precious metals and stocks to collectibles and even cryptocurrencies. Crypto aficionados were especially interested in seeing Bitcoin’s performance in such circumstances because the numero-uno crypto was devised to protect investors in such tumultuous market conditions. People could buy bitcoin India as a safer haven compared to the highly depreciating government-backed fiat currencies. But COVID-19 presented the global crypto community with an unexpected turn of events, and that is exactly what we are going to talk about today.

Bitcoin’s Performance During The Initial COVID-19 Crisis

The price of Bitcoin rose consistently, ranging from the end of 2019 up to January 2020. At this time, COVID-19 had already hit China, although it hadn’t taken the shape of a global pandemic. People could be seen queuing up to buy cryptocurrency in India and other parts of the world for parking their funds under a safe investment cluster. As February drew closer, the world had to come to terms with coronavirus when China announced self-quarantine. Graphic videos of infected people being dragged out of their houses started going viral. At this particular point, the crypto market showed a bearish trend with more and more people selling off Bitcoin. This caused its price to reach the $9000 mark and remain stagnant for quite some time.

Bitcoin’s Price Crash

The pandemic nature of COVID-19 was announced by the World Health Organization on 11.03.2020. Panic waves across the globe followed this. People started selling stocks and precious metals while stocking up on cash, groceries, and other everyday essentials. With the price of Bitcoin coming down by 60% to $4000 levels, this premier crypto experienced its foremost “Black Swan” event. But this massive price surge also lured in a separate category of investors who have been waiting in the side-lines to avail Bitcoin at a heavily discounted rate. Bitcoin’s price stabilized a little over $5000, and very soon, the crypto started moving towards its recovery phase, which was comparatively faster than peer investment markets. 

Bitcoin’s Price Recovery

While Bitcoin has experienced massive price volatility right from the time of its incubation, nothing could be compared to its price crash during the initial months of the pandemic. From $11000 in January, Bitcoin reached sub $4000 level, and this made even the biggest Bitcoin supporters reconsider their decision to hold this crypto any further in their portfolio. But Bitcoin started riding towards the path of recovery by proving everyone wrong. The biggest loser of this pandemic blow remains to be the stock market, which plummeted down by 30%. 

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Current Standing Of Cryptos

Cryptocurrencies like Bitcoin are free from governmental controls and have established rules for dealing with inflation. Such attributes make these digital currencies an excellent hedge even in the situation of market collapse.  The rapid spread of pandemic has also added to the use of blockchain technology coupled with mistrust of people in traditional systems of finance. The safer and more efficient blockchain technology offers accountable means of resource distribution. This is why numerous NGOs and government bodies have been implementing this technology for keeping tabs on the COVID-19 situation. 

Certain governments are encouraging non-cash modes of payment to manage the COVID-19 crisis effectively. Investors usually relied on cryptocurrencies as a store of value before the contagion. But now it is increasingly being used as a medium of exchange coupled with the paradigm shift in demand towards cashless payments. Increasing usage has also led to more probabilities of crypto fraud as several families have lost their income source due to the COVID-19 pandemic. Under the Twitter Bitcoin fraud, around 130 high-profile crypto accounts were hacked.

The Indian Scenario

The Indian Supreme Court has directed its Central Bank to lift the ban imposed on cryptocurrencies. This has induced a ray of hope amongst the Indian stakeholders of the crypto sector. The global crypto market’s capitalization during the early months of 2020 amounted to USD 261 billion, which marked an increase of 70 billion USD starting from the onset of 2020. India’s economy was booming during the 2017-18 period, but its incremental GDP still lagged behind the current year’s total market capitalization by USD 15 billion. This number proves that the global crypto market is advancing at an exceptional pace irrespective of the pandemic. 

Final Words

The Chinese government is currently funding local crypto champions and pushing different blockchain projects to prepare for a seamless flow of transactions. Nations like Russia and Iran are also doubling their cryptocurrency efforts while leveraging on the current geopolitical climate. Mark Carney, the Bank of England’s governor, has recently announced a Synthetic Hegemonic Currency on similar lines to Facebook’s Libra crypto coin. This is being seen as a potent alternative to the traditional dollar. The crypto sector has received a healthy influx of both institutional and individual support before the outbreak of the COVID-19 pandemic. The crypto interest also spiked significantly in the months following the lockdown as people wished to exercise greater control over their asset holdings.

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Frequently Asked Questions

Is Cryptocurrency Banned In India?

No, cryptocurrency is not banned in India. India has seen its ups and downs in the crypto sector concerning its legal status. The Reserve Bank of India (RBI) issued a circular in April 2018 advising all organizations under its jurisdiction not to trade in virtual currencies or provide services to assist anyone in dealing with or settling them. A government committee proposed outlawing all private cryptocurrencies in mid-2019, with up to ten years in prison and severe penalties for anyone dealing in digital currency. The Supreme Court overruled the RBI's circular in March 2020, allowing banks to undertake cryptocurrency transactions from dealers and exchanges.

Is Cryptocurrency Safe To Invest In?

Cryptocurrency investments are subject to market risks, but if sufficient security measures are not taken, trading accounts can be maliciously accessed. Investments come with risks and uncertainties, and we cannot claim that any digital currency investment is risk-free. Buying and selling cryptocurrencies can be risky even if the trader is knowledgeable about the market and treats their coins carefully.

What Is The Meaning Of Crypto?

A cryptocurrency is a digital currency that is secured by the process of cryptography, making counterfeiting and double-spending almost impossible to happen. Blockchain technology is used to produce cryptocurrencies ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a centralized authority does not issue them.

Is Ethereum Safe To Invest?

The Bitcoin market is unquestionably more volatile than the stock market. This may not be the market for you if you are incredibly risk-averse. Ethereum, on the other hand, may be a terrific investment for you if you're a diamond-handed investor who won't lose sight of short-term losses. Ethereum is a relatively safe investment as it is also based on blockchain.

What Is The Safest Cryptocurrency To Invest In?

Bitcoin has had the highest market capitalization, has been around the longest, has the most experienced development team, and has enormous network impact and brand recognition. As a result, while trading cryptocurrencies, the rate of return on Bitcoin is commonly used as a benchmark. However, the risks associated with cryptocurrencies remain, and the safest cryptocurrency for you depends on your analysis.

Who Invented Cryptocurrency?

Satoshi Nakamoto invented cryptocurrencies and the technology that makes them function in 2009. The presumed pseudonymous individual or persons who invented Bitcoin used this identity. In addition, Nakamoto created the first blockchain database. Even though many people have claimed to be Satoshi Nakamoto, the person's identity remains unknown.

What Is Crypto?

Crypto or a cryptocurrency is a digital currency protected by cryptography, making counterfeiting and double-spending nearly impossible. Blockchain technology is used to produce cryptocurrencies (a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a government does not issue them. The word "cryptocurrency" refers to the encryption methods employed to keep digital currencies and the network secure.

Which Cryptocurrency Is Best To Invest In 2021?

Many altcoins are flourishing to invest in. Some cryptocurrencies with great potential are Ether, Ripple, Tron, and more. Investors are trying to diversify their portfolios and are flocking to the leading cryptocurrencies. Many growing businesses are already accepting cryptocurrency as acceptable payment methods.

Is Pi Cryptocurrency Safe?

Pi Network (PI) is the newest digital token to catch the cryptocurrency community's interest, even before it has wholly debuted. Some users see it as a chance to get engaged in a cryptocurrency from the beginning and profit in the future, similar to how early Bitcoin adopters made huge profits by mining and keeping the coin. Other users have compared Pi to a worthless multi-level marketing (MLM) scheme.

How To Invest In Cryptocurrency In India?

There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is the process of verifying and adding transactions between users to the blockchain public ledger. Purchasing cryptocurrency in India is a straightforward procedure where investors simply participate by registering with a crypto exchange such as WazirX. After registering for an account, citizens can trade multiple cryptocurrencies, store cryptocurrency in wallets, and more.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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