The COVID-19 pandemic has accelerated technological innovation in many sectors. In particular, the digital payments sector has experienced a huge increase in usage and development as the pandemic moves us towards a cashless world.
The crypto space is stronger than ever
Earlier this year, when news of the coronavirus spread around the world, there was a huge drop in the stock market. At that time, the crypto markets were extremely correlated with the stock market, and as a result, Bitcoin and all other crypto assets experienced a colossal decline.
However, this did not last long. The cryptocurrency proved to be the most efficient asset class of the year, and after a significant drop, it quickly recovered. The drop has shaken up a lot of weak players in the industry, but there has been a long line of cryptocurrency companies willing to buy into the dip. Despite great concerns and uncertainty, the market saw this as an opportunity to accumulate at a reduced rate.
As much of the world was under lockdown earlier this year, economic uncertainty around the world became increasingly apparent. Most major developed countries feared inflation, recession, and even depression.
The expected collapse of the stock market
The expected stock market crash came a long time ago. Many economists assume that this kind of event should have occurred in 2018, and if it is delayed, the consequences of the economic crisis will worsen.
In November 2018, economists warned of a potential 70% correction in 2019, mainly due to volatility over the previous year, along with the 10th anniversary of the global financial crisis and the longest boom period in history, since the 1991-2001 cycle. .
But, 2019 exceeded all economists ‘ expectations, ending the year at a record high. In March of this year, we saw the Dow Jones fall by almost 8% in a day, with the stock continuing to fall for several days before hitting the bottom. Some economists say it was the crash we expected, others say it wasn’t.
Harry dent, founder of Dent Research and editor of the Economics and markets newsletter, said the US is heading for a great depression-like decline in 2021, suggesting an 80-90% adjustment.
Governments and Central banks are in a difficult position. Regardless of your political beliefs, ensuring that families can eat something and pay their rent while trying to prevent an economic collapse during a pandemic is impossible to balance.
Rising sentiment in the crypto market
The COVID-19 pandemic has accelerated technological innovation in many sectors. In particular, the digital payments sector has experienced a huge increase in usage and development, as the pandemic aims to make our society cashless. At the peak of the pandemic, many retailers and merchants did not accept cash for sanitary reasons.
This opened up the world to cryptocurrency, as many began to see the benefits of blockchain-based payments. People are finally realizing the dangers of partial banking and quantitative easing. The deflationary properties of cryptocurrencies such as Bitcoin are viewed in a new light by both retail and institutional investors.
Since the initial crash, the stock market has experienced a record recovery, but this was largely due to the small number of companies supporting the NASDAQ and S&P 500. Companies like Google, Apple, Tesla, and Amazon grew during the pandemic, but there were many areas of industry that were hit harder than others: for example, hospitality and entertainment. The stock market figures did little to reflect the reality of record unemployment and a significant drop in productivity around the world.
As the dollar continues to lose value, its place as a global reserve currency is in question. The value proposition of Bitcoin as a means of protecting against inflation and currency depreciation has never been more convincing. This may be why the” wall of money ” from institutional investors and public companies is entering the crypto markets.
Demand for Bitcoin Is so high that asset managers can no longer buy significant amounts of cryptocurrency without raising the price. Digitally verifiable scarcity has become a very desirable feature in a very short period of time, and this is reflected in recent price changes for bitcoin and other cryptocurrencies, as investors flock to the asset class as a hedge against inflation.
In previous bull markets, the dominance of the BTC often led to a severe depletion of altcoins. However, this is neither 2017, nor the ICO boom. A look at the 100 largest cryptocurrencies by market capitalization now, compared to what it was just a couple of years ago, shows that there are many fully working cryptocurrency projects and tokens that are really useful for users. The market is no longer entirely based on speculation, and so many mid-cap companies have shown resilience during the recent Bitcoin pump.
Fear, uncertainty, doubt
There was a time when you could get interest on a Bank account. Corporations often buy back shares or invest in bonds, but this is no longer a viable option, as stock market valuations now make no sense.
Bitcoin is likely to appear undervalued by major tech companies. If Apple invests, the cryptocurrency’s market capitalization can grow exponentially.
Despite growing confidence in cryptocurrencies and the adoption of blockchain technology, much of the world is ready for what could be one of the most historic U.S. elections ever. The election is just one day away, and experts say it is unlikely that any of them will significantly affect the crypto markets.
The election served as a great distraction from the global economic crisis for many people around the world. The ongoing debate over the second round of stimulus has put many market speculations on hold, and when the election results are announced, we may see a return to market stagnation in a month with extreme volatility, both in traditional stock markets and cryptocurrencies.
Crypto assets, along with the stock market, were hit hard in March. However, unlike traditional Finance, trust in the crypt has only increased over the course of the year, and trust in the stock market has never been below today’s level.
The growing interest, adoption, education, and adoption of cryptocurrencies, along with innovations in the blockchain industry and compatibility with the traditional financial system, suggests that more people are beginning to turn to crypto in times of adversity. As a result, Bitcoin is thriving.
The crypto market has been strongly correlated with the stock market for most of the past decade. The BTC asset has also shown a correlation with gold, suggesting that many view this crypto asset as a similar store of wealth.
During the economic uncertainty of the day before the US election, which affected the stock market, Bitcoin seems to be losing touch with it. This week, BTC triggered a rise in market sentiment, while stocks entered a bearish trend.
Interestingly, many of the most successful altcoins did not falter during this period, demonstrating a new class of well-established and respected altcoin projects.
Some of the most respected investors and asset managers have openly stated that the stock market today is a dangerous place to store your capital. Meanwhile, against this backdrop, several well-known public companies and institutions are adding Bitcoin to their portfolio.
Developments and innovations in the blockchain industry show that the outdated financial system simply cannot keep up with the cryptocurrency space without promoting financial accessibility. Meanwhile, many developing countries are thriving on the shift to cryptocurrency adoption in the face of economic uncertainty.
Bitcoin and cryptocurrencies have shown stronger fundamentals, higher levels of support, and more widespread adoption since the beginning of the year. These are significant advantages to protect against a future fall in stock market prices or, if the US election results do not Bode well for the future of stocks, faith in the dollar is publicly lost, or a second lockdown will hit the economy.
However, stock markets may face a much stronger fall than we have seen so far in 2020, with the foundations supporting the global financial infrastructure weakening. Some economists are preparing for an 80% drop in 2 years.
The cryptocurrency market may fall in correlation with traditional ones, however fundamental factors suggest that it may not be as sharp, with a money wall ready to enter and buy the drop.
The worst may be yet to come for the global economy, but crypto markets look stronger than ever, with bullish momentum based on strong fundamentals.
Indirectly speaking, the pandemic has boosted financial education, which means people are better prepared for the second round of COVID. In the future, it is likely that innovations in the crypto space will continue to evolve, challenge, and interact with the legacy financial system that is trying to keep up with this new economic paradigm.