The COVID-19 pandemic has been nothing short of a disaster for the lives taken by the virus and also the economic impact it has had. The. It has created uncertainty in all corners of the world. In a similar way, it has left some effect on crypto investment. When the entire stock market was facing uncertainties, cryptocurrency is not a big thing to skip these uncertainties. But amazingly, it has faced a positive effect.
Many commodities and services were losing their actual value. As a result, it was hard at that time to uncover the potential of products listed in the stock market. We can say that the pandemic has reduced investing in regular or traditional stocks and the shift has benefitted crypto investment.
In order to understand how the COVID-19 pandemic has impacted crypto investment, it’s important to analyze other associated factors accordingly. Regular stock and crypto investment are two very different things. Yet they have some connections. If something is impacting the stock market, definitely it is going to leave some effect on another market during the pandemic.
Let’s check the direct and indirect impacts of the COVID-19 pandemic on cryptocurrency
Impact of the COVID-19 Pandemic on Crypto Investment
1) Disrupted Traditional Investment
There were a lot of disruptions for traditional investment due to the COVID outbreak. We had a very unfamiliar scenario of the stock market. The pandemic has changed the definition of good and bad in the stock market regime.
Stocks that were good to invest for long-term or short-term were suddenly losing their actual value. Most strategies of experts were failing. And it was really worst for individual investors. Such a high level of uncertainty has caused confusion. The confusion fog was too thick to look further. All we were able to do is wait to let the market soothe and get robust form again. After two to three-quarters of the pandemic, the market started returning to the good side. The market will return to a better side but exactly when it was not predictable at that time.
If again outbreak takes place again the market will face a downside. This fear was constantly there. This uncertainty has made people focus more on digital investment. Cryptocurrency is truly a new rather unexplored thing. But people were taking a break from the traditional investment and invested that time on knowing more about cryptocurrencies. As a result, cryptocurrency got some exposure. People started investing in it.
Crypto investment is actually an effect of this digital transition. Country-wide lockdowns have made us understand that this is high time to perform in an online way. From ordering food online to having digital money- everything is part of this digitized transition. When we are managing everything using the internet, why not include money in a digital way.
No longer is cryptocurrency a new thing. It’s in around for more than a decade. Who has invented it- is still a mystery. But someone from Japan is behind everything.
2) The New Habit of the Internet
The internet was the savior at that time. People have used it for nearly all reasons. People rather consumers were adapting to the new normal regime. Along with accepting the new normal norms, they were willing to make decisions. There are many areas that we can manage better using the internet in comparison with the traditional or offline ways. The pandemic has boosted the productivity level of many organizations as their employees were handling things better online.
More and more people were understanding the potential of the internet and online tools. It seems that due to the pandemic and lockdowns, financial institutions have understood how important digitalization is in today’s scenario. For example, during the pandemic, the UPI transaction reached a high peak unexpectedly. The sudden force of turning everything into digital has given space for cryptocurrency to grow.
A quick pause from the traditional stock market to let the market get better again resulted in more research and investment in cryptocurrency. If it was an offline thing, it was hard to start this way. It was accessible at the ease of home using the internet. This ease, time, and the new habit of turning everything digital have resulted in more crypto investment.
3) The Appetite for Digital Currency
The COVID-19 pandemic has hit us out of a sudden. At the beginning of the pandemic, no major economic crisis was there. But the initial pandemic shock led the market to face a liquidity crisis. Many small to giant investors were liquidating their holdings and turning that into cash if possible. All types of assets faced the impact of the pandemic. Even safe assets i.e. safe heavens face more or fewer disruptions. The gold decreased by more than ten percent. Even the cryptocurrency or crypto assets faced difficulties at those extraordinary phases. According to experts, this phase was all about checking what investors already know and what more to explore.
The main advantage of crypto is here code is the law. The process defines both supply and demand early. After the initial period of disruption, more and more institutional money has been invested in crypto assets.
There is another reason for the increase in crypto investment is the discussion on the entry of blockchain-based Euro or US Dollar in the market. It has simply boosted the overall demand for cryptocurrency. It is not that cryptocurrency does not come with any drawback, it does. Still, many sides of crypto are still unknown. So, whether those sides will be positive or negative is still a mystery. But it’s evident that it is going to be a robust backbone infrastructure for digitized currencies. Cryptocurrency will definitely accelerate the developmental progress of these digitized currencies.
4) Far from Being the Safe Haven
It is evident that equities have increased since the COVID-19 pandemic. But according to expert analysts, this sudden spike will not last forever. They also believe that leading cryptocurrencies like Bitcoins will require a lot of time to be safe heavens like Silver and Gold.
We have seen that the pandemic has made many people invest in cryptocurrency. The sudden spike was out of our expectation rather than a prediction. Cryptocurrency will have a place in the market. It’s also hard to define the process progress pace. Definitely, the pandemic has boosted the pace. During the post-pandemic phase, we are not sure that the progress pace will be the same. Many countries are coming up with various rules and regulations on this cryptocurrency. Even some countries will impose some limitations on it, for example India. Most probably this government will launch its own cryptocurrency. So, it’s not going to bring tax-saving benefits. If other countries impose similar rules and regulations, it may disinterest many people and that will result in reduced investment in crypto assets.
We all know that many people prefer to invest in the stock market just to save some money from tax charges. With government-provided cryptocurrencies that won’t be possible or the benefit will bring limitations. But in many countries, private cryptocurrencies will have the authorization.
5) Still has Acceptance Issues
Many countries will take time to accept it or activate it. Without any doubt, it has become mainstream still there are some countries that will take time to accept it or make it mainstream there. Government intervention is already interrupting it. The constant interruption or imposing rules and regulations will distract many people from cryptocurrency.
It comes with a lot of potential. A new era has been evoked with this digitization. Due to the pandemic and an urge to handle everything online, there was a common force for digitizing the money. But the COVID outbreak has made the entire scenario truly unpredictable. It’s evident that during this pandemic, cryptocurrency has reached maximum exposure to date. Yet in some countries, due to the outbreak, some moods went against it.
These are 5 crucial ways that the COVID-19 pandemic is affecting the crypto market. Analyzing each impact is important to craft a future-proof stock investment or crypto investment strategy. Traditional stock investment and crypto investment are two different things yet they have a correlation. The market is also filled with many myths that are preventing many people from investing here.
Why You Should Consider Crypto Investing
According to experts, many people still believe that cryptocurrency does not come with any intrinsic value. And even some financial giants are trying to support this hypothesis. For example, we can say that cryptocurrency sooner or later will act like digital gold. It just needs some time and exposure.
On the other hand, the process contains blockchain protocols. Blockchain protocols are basically infrastructure for decentralized applications. In order to collect the value of these blockchain protocols and their native tokens, we have to count the number of deployed applications along with the level of engagement. Users will choose only those infrastructures that will offer them the best tools for their requirements. In the same way, developers will go there where their target users are.
Key Biggest Benefits of Crypto Investing
We can see that cryptocurrency is completely a different idea than the traditional monetary system. The cryptocurrency is entirely retail driven by some enthusiastic individuals. These individuals have believed in the potential of cryptocurrency and the possibility of an intermediary-free world. In this intermediary-free world, everyone will be financially connected. There are many sparkling benefits of investing in crypto, especially in the scenario of 2022. The world has already faced a lot of uncertainties and this year, it is trying to be normal with many new incorporations on the list.
Crypto transactions are basically low-cost things and it occurs in a more private manner. Just by using any smartphone application, exchange wallet, and hard wallet, one is all set to send as well as receive cryptocurrencies. Some cryptocurrencies such as Litecoin, Ethereum, and obviously Bitcoin are buyable instead of cash at a Bitcoin ATM.
It is not that you will always require a bank account to enable these transactions.
e all know that cryptocurrencies depend on cryptography and blockchain security. Decentralized cryptocurrencies are there to ensure secure forms of payment. Such an amazing level of security has attracted many people. Bitcoin i.e. the most robust and secure cryptocurrency with the highest hash rate.
Quick and Cheap
It’s a common thing that many people will invest in crypto for price appreciation. But there are a lot of people also who prefer to use cryptocurrency as a medium of exchange. Leading cryptocurrencies like Bitcoin or ether transactions are a bit costly. But other options like XRP, Litecoin, etc are quite inexpensive. It takes just a few seconds to settle payments.
Fast Industry Growth
It’s evident that cryptocurrency is a fast-paced industry. It’s growing quite well amid all interruptions. We can see that in 2013, the market size of cryptocurrency was near about $1.6 billion. But by the end of June 2021, it has increased to an amazing level i.e. $ 1.4 trillion. The jump or the progress is really impressive.
Bitcoin is the best performing crypto asset that has been performing quite well for more than a decade. In the beginning, it had zero value. But today, it’s an expensive investment choice. So, you can guess the growth here.
Cryptocurrency comes with an amazing level of security and privacy. But it may not that private as many people think of it. Basically, blockchain generates a public ledger in order to record all transactions accordingly. This ledge only shows wallet addresses. In order to track, the observer needs to connect a user’s identity to a specific wallet.
Cryptocurrency is a non-correlated asset class. This market functions in its own way. Factors that are affecting bonds, stocks, and commodities i.e. traditional investments that leave a small effect on the crypto market. The progress clearly states that the market is least dependent on others.
These are some exciting benefits that we enjoy via crypto investment. The impact of the COVID-19 pandemic is no doubt huge. We can see that the pandemic has left both positive and negative impacts on the world of cryptocurrency. The beginning of the pandemic brought disruption even to the crypto market. But with time, it got its charm back and became more powerful than before.
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Tim Thomas holds no positions in the stocks, ETFs, mutual funds, forex, or commodities mentioned.
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