Did bitcoin catch coronavirus?
In less than a year, the COVID-19 pandemic has completely disrupted global markets. Experts note that we’re still not in an economic crisis, but in what is known as a liquidity crisis. The impact coronavirus will have on the global economy is unknown and will likely continue to change markets over the next several years.
The liquidity crisis is something that investors are very familiar with. It represents a period of time when investors opt to liquidate their holdings to cash quickly. The liquidity crisis is what caused the price of gold to drop nearly 3% in a single day in September. But what type of impact did the coronavirus have on bitcoin and the crypto world?
Cryptocurrency prices have always been fairly unstable ever since people started trading with them. In case you’re interested in investing in bitcoin, it’s important that you learn how the COVID-19 pandemic affected it.
Should you invest in bitcoin now?
You probably heard the stories of people making millions overnight by investing in bitcoin. If your dream is to one day do the same, it’s crucial that you first have a comprehensive understanding of bitcoin and blockchain technology.
One of the main reasons why people want to invest in the digital currency is because they can do it even with a small amount of money. On top of that, they can do it from the comfort of their home. Although the coronavirus pandemic was strong enough to initially slow down bitcoin, it couldn’t even come close to stopping its power and popularity.
Even today, the digital currency community is bigger than ever and by all estimates, it will keep growing. Following the initial crisis and lockdown of countries around the globe, prominent investor and former Goldman Sachs fund manager Raoul Pal announced that he was moving a quarter of his portfolio to bitcoin.
When a big player like Raoul Pal announces something like this, many follow suit. But what’s the actual reason why bitcoin is still growing despite everything that’s happening? To find out, it’s important that you learn what the crypto world went through during 2020.
The coronavirus crash
The stock market crash of 2020, often referred to as the Coronavirus Crash, represented the fastest fall in global stock markets ever. It was also the biggest crash to happen since 1929. The Coronavirus Crash started on February 20 and ended on April 7.
This was a significant time for crypto investors because there weren’t any digital currencies that had to face an economic recession prior to this. In fact, bitcoin was created and launched just after the 2008 financial crisis with the aim to replace the monetary system controlled by central banks.
Although there are currently thousands of cryptocurrencies, bitcoin alone holds the majority of the digital currency market cap. Similarly to how the stock market suddenly collapsed in February, the price of bitcoin fell 48% in less than 24 hours on March 11.
Prior to this event, many investors regarded bitcoin as a safe haven in the event of a financial crisis. It has since been seen that this was a foolish assumption, especially considering that bitcoin never faced a real economic crisis. Even though investors were genuinely worried about what would happen to digital currency in the future, it didn’t take long for bitcoin to recover.
Bitcoin’s v-shaped coronavirus recovery
The price of a single bitcoin plunged to less than $3,800 in the first half of March. The digital currency managed to beat out reliance on stocks just a little over a month later, when it went back to nearly $7,800 on April 24. As of October, the price of a single coin is around $10,500 and will likely continue to rise in the future.
Famous crypto analysts like Edward Morra suggest that the worst days are behind investors in the digital currency space. Many financial analysts and investors note that what’s happening to bitcoin looks like a textbook V-shaped recovery.
While investors are happy that the price of bitcoin has gone up considerably, analysts have learned a lot about the nature of cryptocurrencies. Experts note that the trends bitcoin went through during 2020 shows exactly how much it is influenced by the stock market.
The long game
Every investor in the crypto world remembers the price of a single bitcoin reached almost $20,000 in 2017. That was the moment when many others decided to try their hand at investing in digital currency. What immediately stuck in people’s minds was the fact that you could make a huge profit in less than a day by investing in cryptocurrency.
It took some time before new investors realized that this trend wasn’t going to last forever. In the meantime, many lost money because they only attempted to make short-term investments. However, expert analysts and investors note that you should play the long game.
The cryptocurrency space is still growing rapidly and it seems as if it’s going to continue to rise in the future. Because of this, the price of bitcoin will steadily keep growing. As time passes, there will be additional uses for digital currency, which will also make it more valuable. Many believe that the price of bitcoin is bound to go up substantially in the future, which is why many have long-term investment plans for cryptocurrencies.
Final thoughts
If there’s anything that the recent crisis proved, it’s that bitcoin and other popular digital currencies are here to stay. In March, there was a lot of talk that bitcoin wouldn’t be able to recover quickly, but it did. Recent events also provided some valuable insight into the trends of the crypto world and how they are related to the stock market.
The coronavirus completely disrupted the global markets and even made the price of gold dip historically. The main reason why that happened is that investors were quick to sell their liquid assets for cash in a crisis. Nevertheless, bitcoin proved to be a powerful asset that can hold its value even in dire times.