Among the many spectacular news of the past months, two topics have been of particular interest to me- the COVID-19 pandemic and Cryptocurrencies.
First, is the COVID-19 pandemic that has us all having a subtle despise for physical contact. And the other is the decentralized world of cryptocurrency. Many like me have been asking the question, “what are the effects of COVID-19 pandemic on cryptocurrencies?” And also, “Is it still wise to invest in cryptocurrencies?”
My simple answer is this. The impact of the relationship between COVID-19 pandemic and cryptocurrencies is one that will bring further development to the blockchain technology.
Also, the top cryptocurrencies have always been a multifractal system. And that, before the outbreak of the coronavirus. Hence, the behavior of these currencies goes beyond the present pandemic. And thus, COVID-19 has little or no say over if it is still safe to invest in cryptocurrencies.
Investing in cryptocurrencies, like many other investments, has always been risky, but also, lucrative. Thus, investing in these currencies only needs you to question your ability to take risks, your personal goals, and your needs. And when you finally take on the decision to invest in cryptocurrencies, we at Cloudfaremine are here to make it a whole lot easier for you to increase your wealth.
Cryptocurrencies Before the COVID-19 Pandemic
Before the outbreak of the disease, the world has always known cryptocurrency investments to be both risky and lucrative. But that didn’t stop the drive of investors into cryptocurrencies. And that is a bit funny. Why would anyone invest his resources into something with vivid risks?
So, why don’t we start by reviewing what these risks have always been? And then, see why investors still go into it.
Risks of Crypto-Investment
I keep talking about risks. And if you are yet to be familiar with what these are, here is a quick summary. According to Forbes, we have the following to be the top risks associated with crypto-investments:
- On top of the list is the fear that comes with trusting a new technology. And the fear is a simple question of if the blockchain will never turn out to be useless in the future. Because then, all investments can varnish in the blink of an eye.
- The next is cryptocurrency’s total reliance on digital technology. It has no physical backup. And a breakdown of the technology can lead to years of investment going down the drain.
- There are no real regulations attached to cryptocurrency. And hence, it is a qualified space for hacks and fraudulent practices.
- There is a constant market fluctuation. And it’s quite tasking to predict its behavior. A careless investor could run into losses by investing in cryptocurrencies.
- Finally, not everyone currently accepts digital currency payments. So, why invest in it, right?
Why Invest in it?
Now, you know the most prevalent risks attached to investing in cryptocurrencies. So, why would anyone still invest in something that could vanish anytime?
Well, the answer to this is quite simple too. And it stems from the fact that we have all suffered burns by trusting a third-party with our money. Thus, it became necessary to embrace a new form of currency that removes every counterparty risk.
And the new currency that offered us this financial freedom was cryptocurrency. With bitcoin and the likes, we became free from governmental powers and financial institutions. And we had before us, an uncorrelated system of trading. One in which we all felt safe, being our masters of every transaction.
So, we embraced this new currency. We were enjoying it. But now, we have a new world enemy, the coronavirus. And what then has happened to our cryptocurrency since the outbreak?
During the Coronavirus Pandemic
Since December 2019, we became aware of the novel coronavirus. But we didn’t pay that much attention to it. At least, not until the early months of 2020. At the time of writing, we already had over half a million deaths. And cryptocurrency?
According to the charts in our featured image- thanks to CoinMarketCap– it is glaring that bitcoin, the number one digital currency, suffered a bit of decline too around March 2020. However, this decline came as a result of some liquidity issues.
Whenever there is an occurrence of crises and epidemics, people often get scared, uncertain about the future. And this often births the herding behavior, which involves following the trend of other investors, rather than private strategies.
From this behavior, a lot rushed to get part of their currencies sold to get physical cash. And it is quite easy to understand that most were scared of losing their investments.
The truth is that bitcoin, and other cryptocurrencies, were not the only ones that suffered a decline. Even gold, with its high reputation as a haven, went down around this time too. Thus, it was more or less a general decline in the financial world.
But after some time, bitcoin started rising again. And it keeps going up!
Why it Started Rising Again, and Even More?
Well, the answer remains the same. Even with the attached risks, we still prefer a means of exchange without counterparty risks. And this brings to our table gold and cryptocurrency.
These two are similar in ways such as their scarcity. But are also different as cryptocurrency allows ease of exchange, more than gold does. Thus, leading us back to our safe friend, the cryptocurrency. And with the recent rush into cryptocurrency, it had made developing the technology a crucial need. Hence, the belief that this pandemic will birth a more developed blockchain system.
With the recent rise in bitcoins and other cryptocurrencies, it is clear that the pandemic has little or no down effect on the crypto world. Thus, if you are looking for a safe investment from the impart of COVID-19 on world economics, we are here to help you.