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Has the Covid-19 Affected Bitcoin? Get to Know It Here!

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Man showing a phisycal bitcoin

The Covid-19 outbreak has had a devastating effect on the stock markets, and the federal reserve will probably need to put in place measures to assist in rebuilding confidence in the markets. This impact has been felt more widely in the global economy as every government has been impacted to some extent by the shutting down of business and restrictions on the movement of people.

But as the experts focus on rebuilding consumer confidence, what can we say about cryptocurrencies, and especially Bitcoin (BTC), which some people thought was immune to a pandemic such as Covid-19?

Impact of Coronavirus on Bitcoin

Quite a number of people had assumed that when regular stocks and futures take a hit from the coronavirus outbreak, that cryptocurrencies would not be affected. After all, isn’t this the very reason why people invest in Bitcoin and other cryptocurrencies – to avoid situations like when their money gets wiped out in a global pandemic?

The reality is that Bitcoin took a 15% hit once the markets went sideways, and this was caused by a significant drop in demand. Remember, like many things, the value of Bitcoin is determined by demand, rather than federally adjusted interest rates, or GDP.

Generally speaking, Covid-19 has damaged all markets, be it crypto or other forms of investment. However, the difference with Bitcoin is that people may find cryptocurrencies more appealing at a time when global, markets are on a downturn and traditional currencies are losing value. The problem for investors, is that Bitcoin is not easily accessible to the general public and can’t be used to buy supplies like food and milk.

Bitcoin Turned Into “Risk on, Risk off” Vehicle

If at some time in the future Bitcoin is adopted on a mass scale as a legitimate medium of exchange, then we can more easily measure its resilience against a global crisis. At the moment, Bitcoin and other cryptos are acting in the familiar “risk-on, risk-off” model. One notable figure in the world of investments and trading is John Bollinger. He wrote in a recent publication how he was “surprised” that Bitcoin had failed to act as a hedge in the current financial crisis.

It is worth mentioning that Bollinger, has over 40 years of trading experience, during which he was seen just about every possible trend and sets of circumstances. Bollinger is not alone in wondering how cryptocurrency ended up being so closely tied up with the U.S. stock market. Other people have expressed concern over the same. Peter Brandt, another veteran trader, says that Bitcoin has a very limited time to prove itself in the current crisis. The majority of crypto investors are expecting (or hoping) Bitcoin to skyrocket sometime soon, otherwise the whole concept of cryptocurrencies will become less appealing.

What’s the New Value Investment Channel?

The whole attraction point for Bitcoin is the idea that it provides a way for people to turn this asset into a form of cash that is impossible to manipulate. Before cryptocurrencies came up, people were trapped into a faulty currency system and the value of their investments were tied up to GDP, the Fed, market sentiment, politics, banks, etc. Block chain offered freedom from all this, and Bitcoin has been the poster brand for cryptocurrency. Since the release of Bitcoin, the global economy hasn’t experienced anything as serious as what we have now.

The main reason for investing in Bitcoin was because people needed a way to shield their asset from the fragility of the global financial system, and the volatility that the whole system is exposed to. Indeed, some well-known investors have pushed the idea that Bitcoin will overtake cash as the currency for millennials. Tim Draper, the billionaire investor and Bitcoin enthusiast has already pledged to move all his money into cryptocurrencies, and he also promises that its Bitcoin, and not governments, or banks, that will save the day after this crisis.

So, Is Bitcoin Immune to Coronavirus Outbreak?

First of all, Bitcoin halving requires new equipment every single time. Why? Because once the halving takes place, all the existing equipment is no longer used for mining, and must be replaced. A mining farm will then replace the old equipment to make sure that everything is on par with the latest algorithm changes. Since most of these mining farms are located in China, it’s possible that the Coronavirus outbreak may impact on this activity to some extent. This pandemic may affect the manufacturing of new equipment as well as the ability of mining farms to keep up with demand. In addition, a reduction in power will also delay Bitcoin halving.

Bitcoin still offers an exciting alternative to fiat currencies and precious metals, and although it’s future is hard to predict, there’s no question that it’s price has unlimited potential, and some researchers predict that it could surpass the current $50,000 mark and exceed a value of $300,000 within 20 years. The ball is still rolling, and we’re yet to see how far Bitcoin will go from here.


John Asher

John Asher

I am a crypto-enthusiast that likes to write about the blockchain industry. Mostly, I'm interested in the gaming industry and how it will revolutionize in-game asset ownership.

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