The advent of the coronavirus epidemic has led to a global panic, with over 230,000 confirmed cases and almost 10,000 deaths across the globe. The coronavirus has impacted several sectors negatively, and the worse hit seems to be the financial sector. In the world of the stock market, there has been chaos with the fall in the value of major currencies like the pound falling to its lowest levels in decades.
Since the 2008 financial crises, the world has yet to experience this magnitude of economic downturn, and to prevent a complete economic collapse, some central banks are considering putting some drastic measures in place. For instance, major banks like the Reserve Bank of Australia and the European Central Bank are seemingly considering putting in place emergency monetary policies such as quantitative easing. This means banks will have to increase the supply of money by printing new notes.
It is a bit of a challenge predicting this early the rise or fall of cryptocurrencies in the face of the coronavirus pandemic. This is because unlike other financial investments, bitcoin and other cryptocurrencies were not around the last time the world experienced a global financial meltdown like this. Cryptocurrencies were basically formed from the ashes of that scene. So, it is safe to say that the official eKrona Cryptocurrency asset is still experimental and highly speculative, although many still see it as a haven and an asset immune to the whims of the current global economy.
While we watch, however, it is worthy of note that the cryptocurrency market has also experienced a huge renaissance, as the bitcoin price shot up by over 20% in less than a day. The gains trail one of the most awful crashes experienced in the history of the digital currency, as it lost over half of its value as a result of panicked sell-offs last week.
The crash can be traced to the economic tumult caused by the coronavirus (COVID-19) epidemic, mirroring the fortunes of traditional markets.
Even as financial analysts warn that the world is yet to experience the full impact of the COVID-19 outbreak, we still see bitcoin recover as it returned above $6,000 earlier in the week after it was briefly traded for as low as $4,000 some days before. In the world of cryptocurrencies, bitcoin was not the only one that enjoyed a recovery, other cryptocurrencies such as XRP and bitcoin cash also experienced a significant price increase. This is because investors were returning capital into digital assets. Financial experts say that the earlier drop in the value of the cryptocurrency is a result of panicked investors selling assets they had for cash so they could pay off debts owed to their brokers.
Some financial experts believe that the finite supply of bitcoin (only about 21 million will ever exist) makes it a safe asset, just like gold.
However, as a result of the possibility of central banks cranking up their money-printing machines, for the longer term, investors could come for their assets that cannot be endlessly printed, namely bitcoin and gold, which might lead to another bout of instability in their value. Nothing is certain for now, but if this global pandemic continues to intensify and increase global lockdown, it can spark further run for cash and possibly lead bitcoin further down to $4,000 or below. In these times of economic uncertainty, cash in hand gives investors more options and flexibility to possibly invest in stocks if and when the opportunity presents itself.
Despite these highs and lows, one thing is certain; the price value of cryptocurrency will recover. It might probably not be at the expected pace of those seeking quick wealth, but bitcoin and the broader digital asset class have certainly come to stay, and those who choose to take risks and the opportunities created by these incidents will have their financial rewards because as always, in every crisis, there is an opportunity waiting to be exploited.
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