The advent of COVID-19 undoubtedly led to the biggest surge in crypto to date. Let us analyse its journey through this time and its splash into the mainstream.
The advent of the corona crisis, whose presence still ebbs and flows to this day, has become the hallmark event of recent times which affected all walks of life as the authorities scrambled to control its spread. The financial markets were also greatly affected by the restrictions imposed, but there is a silver lining for digital currencies like Bitcoin and others.
The pandemic brought to light the vulnerabilities of conventional finance instruments that largely left the resilient crypto unaffected. This led to Bitcoin (BTC), altcoins, and related institutions like crypto exchanges in Singapore seeing a rise in popularity and investment values, as well as greater exposure and integration to the mainstream.
A loss for traditional finance became a win for crypto
COVID-19 paralysed global supply lines, causing many industries to take desperate measures to stay afloat. This led to significant economic repercussions such as inflation and devaluation of fiat currency, an asset class many investors fled from toward safe haven assets (i.e. instruments detached from the wider market) such as gold.
Since the market behaviour of cryptocurrencies is unlike that of its fiat counterpart, investors also flocked to these digital assets and have likened BTC to that of ‘digital gold’ given it hardly has any correlation with the mainstream market. Moreover, certain features of BTC and other altcoins – such as the lack of a central controlling authority and fixed supply – make them a great inflation-proof option during periods of falling global GDPs.
Many renowned financial institutions began to pile into crypto with the weak dollar and COVID-19 being the main motivators. JPMorgan’s report saw organisations buying into BTC thrice more than in Q3 2020. For instance, MicroStrategy, a billion-dollar and publicly-listed company, invested $250 million of its cash reserves into BTC in July 2020. Fidelity Investments also conducted a survey that out of 800 US and European institutional investors, 80 per cent eyed the promising prospects of digital currencies. At the same time, a third of them already had their own crypto holding. Ria Bhutoria, Fidelity Digital’s Director of Research, stated that more US investors owned digital assets in 2020, an increase of 27 per cent in their portfolios from 22 per cent in 2019.
Mainstream adoption of crypto
With the continued progress towards digitalisation, the finance world is certainly not far behind. During the lockdown, virtually everyone turned to digital solutions for nearly everything, from payments and personal finances to investments. Research conducted by the deVere Group revealed that the pandemic led to a 72 per cent increase in the usage of fintech apps by Europeans due to the transition to remote working.
Digital financial systems need a robust back-end to ensure transactions are secure, cost-effective, and quick. Altcoins focusing on blockchain-based solutions (like dApps and smart contracts) for existing financial systems are poised to step in, such as YFI, Stellar Lumens, and many other competing altcoins that offer such solutions.
Many financial institutions have begun to turn to blockchain solutions to facilitate cross-border transfers, typically with crypto platforms open to collaboration with financial regulators. On the flip side, whether it’s the proposed United States Crypto-Currency Act of 2020, Russia’s cryptocurrency regulations, or China’s Digital Yuan, more and more countries of all sizes are gradually dipping into crypto territory spurred by the impact of the coronavirus pandemic.
While only time will tell how state digital assets and future regulations will impact the world of crypto, the COVID-19 crisis ultimately proved one thing – cryptocurrencies are here to stay, and they are on the fast track to becoming more vital to the global economy than ever.
Seeing as the industry's strongest proponents may see validation in the comeback of cryptocurrency, do make sure to trade through a regulated and Monetary Authority of Singapore (MAS) approved cryptocurrency exchange in Singapore, such as Coinut, if you want to get in on the action.
RISK DISCLOSURE: ⚠️
Digital payment token investments, such as cryptocurrencies, are not guaranteed by service providers or cryptocurrency exchanges and the government. It is crucial to exercise caution in investing, including the awareness that a part or all of the capital may be lost and may not be recovered especially in cases of high price volatility or down market, bankruptcy, seizures and other factors. Hence, the user’s risk tolerance, investment appetite or capacity for loss should be set firstly and they should observe safe and knowledgeable investment practices accordingly. For more information, please visit MAS' website.
IMPORTANT NOTE: 📢
Coinut.com is a financial entity regulated as a Money Services Business in Canada and an exempt entity under the Payment Services Act in Singapore. Please be reminded that cryptocurrency trading is highly risky and is not suitable for the general public. For more information please refer to Risk Warnings and Risk Statements.