Bitcoin has become the darling of investors around the world. From 2009, it has come a long way and is now the topmost digital currency out there on the web with a high net worth. The cryptocurrency market is now worth trillions and it is just going to grow in the times to come. If you are interested in bitcoin trading, you might consider knowing the advantages of using cryptocurrencies for payments.
One important factor that has led to a further growth in investment on Bitcoins is the fact that the cryptocurrency has managed to retain its price and even grow much further, during the time of the pandemic. Read and find out about the impact of Covid-19 on Bitcoin price.
Effect of Covid-19 And Omicron In Bitcoins
When the Covid-19 pandemic broke out, each Bitcoin (the first cryptocurrency of the world) could be bought for around 7300 dollars. Today the exact token costs over 46800 dollars – which is a huge rise of 640%. Other top cryptocurrencies of the world such as Ether exhibited similar or even higher rises in price. But this upward movement is not obviously necessary from a theoretical perspective, given that there are quite a few forces that might drive up the demand or down in case of an emergency situation, such as a political or global crisis.
The possibly higher demand for virtual current is during a pandemic led by one set of forces. Given that cryptocurrencies can be traded from any location in the world, it can be possible to reduce the effects of potential liquidity constraints that can occur if trading activities are restricted by local governments as part of a lockdown.
Due to this reason, digital currencies are now more attractive assets when compared to alternatives. It is also a fact that investors, who fear that a crisis will result in politicians or central banks interfering in the market, might like to switch their investments into the cryptocurrency market – which is decentralized and is not regulated by any government or political institution.
To put the matter simply, with cryptocurrencies not being managed by any central entity but operating in an automatic fashion, investors can get the ability to hedge their political risk to some extent and Bitcoins can be more attractive for investment purposes due to this reason.
However, the demand might be punched down by other countervailing forces, if the pandemic continues to sustain for a long term and its effects are evident for more time. In a time of crisis, even in case there is no correlation during normal periods, it is possible for cryptocurrencies to get correlated closely with regular financial markets.
In that case, there might be negligible benefits of switching investments to Cryptocurrencies. The problems resulting from pandemics like Covid-19 might also result in manipulation of cryptocurrency prices and a general avoidance of trading in Bitcoins and other digital currencies by investors due to the fear of being exposed to online criminals – which can lead to major losses.
When there was a rise in the number of new cases of Omicron as well as death, there was an upward movement in the cryptocurrency market and the price of Bitcoins and other cryptocurrencies. As the virus spread and there were more cases of the Omicron virus, there was more investment in the crypto market, which then subsided temporarily, only to regain later.
It is possible that at first people were panicking and were pulling out of the regular markets, but when the dimensions of the crisis became more and more clear, they returned to those markets again. From the perspective of risk-hedging, this kind of behavior might appear to be logical – due to the inherent benefits of Bitcoins and other cryptocurrencies, such as having a decentralized nature.
In 2022, with vaccines having been developed and administered to billions of people and due to improvement in medical treatment, a lot of uncertainties regarding Covid-19 have already been resolved. Naturally, it can be expected that in the long run the cryptocurrency market would continue to keep its dream run unabated. The investor sentiment in the cryptocurrency market is likely to be on the high for many years to come.
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