An analysis of how Bitcoin and other cryptocurrencies have fared in the aftermath of COVID-19’s global economic downturn. The month of March 2020 was marked by lockdowns when most of the planet attempted to halt the spread of COVID-19 by halting social and economic development. Unsurprisingly, this was a time of rapid economic recession, with the World Bank forecasting a global GDP fall of 5.2 per cent in 2020. Even as the coronavirus has harmed several companies and currencies, it has also strengthened stocks and other financial assets, with bitcoin arguably becoming the most prominent recipient of central bank stimulus steps.
If you’ve been hidden in a cave since March 2020, when bitcoin had a tough month, this might come as a surprise. The cryptocurrency’s growing prestige as an alternate “store of value” was seriously harmed when it plummeted by more than half in a matter of days, crashing to $4,000 amid a panicked stock market sell-off. Gold, like bitcoin, plummeted in early March before rising to new all-time peaks in the months that followed. What is the reasoning behind this? The primary explanation for this is that on March 23, the Federal Reserve agreed to potentially ‘unlimited’ quantitative easing, paving the way for trillions of dollars to be pumped into capital markets by buying mortgage-backed securities bonds.
The S&P 500, Dow Jones, and bitcoin (along with gold) have reached new peaks due to the Fed’s actions, and all three are now measuring their ATHs as of this article. However, in bitcoin, stimulus funding isn’t the only factor contributing to its meteoric growth since March 2020. It has also gained from an increasing perception that the US dollar is declining and apprehensions over impending inflation. Around the same period, shoppers’ record discounts also aided in pushing its price to new levels. Also visit the official website.
MicroStrategy, one of the first and most profile enterprises to implement crypto as a reserve commodity, perhaps better sum up the fundamental reasoning for purchasing Bitcoin. In its August declaration of its initial acquisition of Bitcoin, its chief executive Michael Saylor said that “unprecedented such as quantitative easing could have a major depreciative impact on the actual long-term valuation of fiat and many other traditional asset classes.”
This paved the way for another company’s incremental trick to translate cash into crypto, a trick that quickly became steadier as 2020 came to a close. Square acquired bitcoin for $50m in October, while MassMutual, a 169-year-old mega insurance firm, bought $100 million in bitcoin in early December. Also, in October, PayPal revealed it would enable bitcoin to be purchased and spent.
These moves have dramatically strengthened Bitcoin’s bullish case, with the MassMutual news coming only a couple of days before Bitcoin first breaks the $20,000 mark. Such purchasing led the way for the next 2021 case, with Tesla buying $1.5 million in bitcoin, most recently in early February, some a month before bitcoin reached its latest all-time peak of $61,711.
But it isn’t just business and financial curiosity in bitcoin’s inflation-fighting properties that has propelled the blockchain after its low point in March 2020. The imposition of national lockdowns has resulted in a huge accumulation of savings, as one would expect. Consumers worldwide are said to have saved $2.9 trillion in the last year, with the market currently providing little options for spending their extra cash. Many people have taken to investing, with the latest GameStop craze demonstrating the current level of excitement in trading. Orthodox markets aren’t appealing to savers either. Retail sales in bitcoin exceeded institutional acquisitions in Q1 2021, according to data from JPMorgan, with 187,000 bitcoins purchased against 173,000 by institutions.
Financials In The Aftermath Of The Pandemic
This means that the coronavirus pandemic has benefited bitcoin in every way. It also means that until the economic rebound is nearing completion (whenever it could be), we should foresee a drop in bitcoin’s price as investors continue buying and institutions resume engaging in real-world economic operation. Nonetheless, notwithstanding some remaining concerns around stable coin issuer Tether, bitcoin seems to have established itself as a valid investment tool. And if the economy eventually recovers, it is expected to stay enticing to investors for the near future, not least due to its finite availability.