Coronavirus VS Bitcoin battle

Colin Baseman

Covid19 and lockdown have a huge influence on the world and financial institution worldwide. NewsBlockchain is set to explore how Bitcoin is affected by the pandemic.

Coronavirus has changed the world economy. A lot of businesses have suffered, such as hospitality, food, education, beauty industry; however, for some the lockdown was a blessing in disguise. Jeff Bezos is projected to become a trillionaire by 2026. The huge success of online retailer Amazon due to lockdown played a big part in his massive gain in funds. So what about Bitcoin? In this article, we are going to explore the effect of Coronavirus on Bitcoin.

The influence of stimulus checks in the USA and worldwide on Bitcoin

Since a lot of people have lost their jobs due to Coronavirus, governments worldwide faced a question on how to support their citizens. The lockdown in some countries has lasted for 2-3 months and all these time people have been out of the office, received reduced paychecks, and had no money for rent and utility bills. Add on top of that closed kindergartens and schools and you will receive a very dangerous mix. However, all these issued stimulus checks that round up to trillions of dollars in the USA alone may debase the US dollar and other currencies. The crypto enthusiasts say that the possible inflation of fiat currencies may lead more people to accept the digital gold. Bitcoin, in their opinion, can play a role of hedge to cope with the consequences of the weakening position of fiat currencies.

But there are limiting factors too! Experts say that inflation due to stimulus will not happen right away. The rising number of unemployed people and a fall in demand may relieve upward pressure. More and more people file for unemployment benefits. Bank of America reported that if the governments and central banks will not be successful in handling the consequences of the pandemic, we can expect a contraction in global growth by almost 3 %. 

(Statistic is provided by JPMorgan)

That is why Bitcoin may not double its price over a short period of time due to inflation as some bulls expect it. But still, a lot of investors see it as a more stable option. One of them is Olga Feldmeier. She appreciates the big potential of  digital gold and believes that it may act as some sort of save haven in the difficult times for the global economy.

The rising popularity of trading of Bitcoin and altcoins during the lockdown

Even though it is not as profitable to mine as it was back in a day, when people were ready to sell their entire estate and quit their job for a crypto farm, they have more time to consider alternative sources of income. Some of them have lost their jobs; some of them heard rumors about Bitcoin rising dramatically because of Coronavirus.

Rbc.ru reports that the Russians began to actively trade cryptocurrency during the period of self-isolation, according to representatives of several exchanges. Gleb Kostarev, the head of the Binance office in Russia and CIS is among those representatives. He has noted the rise in user activity on platform over the last three months. Some activities broke exchange records. For example, the number of registered users in April this year was 2x more than at the end of the last year. The head of the Binance branch also commented that futures trading gaining popularity as well.

United Traders analyst Fedor Anaschenkov added that, on average, trading volumes on exchanges rose by a third in March, but self-isolation is just one reason. Interest in cryptocurrencies (as seen by Google Trends), and Bitcoin trading volumes are closely correlated with price fluctuations. The higher the change in value (no matter which way), the greater the interest. The biggest spikes were in March, when the largest daily decline in cryptocurrencies occurred due to panic in the financial markets, and in early May, when the BTC price jumped and stormed the level of $ 10,000. Anashchenkov explained that the market is now growing amid positive global sentiment the economy. He also added that the confidence of both retail and large investors in classical instruments is undermined, uncertainty remains, so they are more actively investing in cryptocurrencies, which are little dependent on the macroeconomic situation. He expects the rise of interest towards crypto after Bitcoin will manage to stay above the mark of 10 000 USD.

Numbers are on the side of Bitcoin

For the fourth consecutive month, Russians continue to withdraw currency from bank deposits. As of May 1, the volume of deposits of individuals in foreign currency decreased by 1.2% ($ 1.1 billion). Since January 1, accounts have been emptied by $ 8.3 billion, that is, almost the entire amount of currency that has been accumulated over the past year. At the same time, more and more people are coming to the stock market, both domestic and foreign. According to statistics by Moscow Exchange, in April, the number of registered customers exceeded 8 million people, and growth since the beginning of the year was 20%. Positive dynamics in opening accounts are also recorded by brokers. EXMO CEO Sergey Zhdanov said that activity at the site has increased by about 15-20%. The increase in users from Russia was 12%, from Italy - 20%, from the UK, Germany and the Netherlands - about 10%, from Ukraine - 9-10% compared to the same period last year. In addition, users began to log into accounts more often, and trading activity in general also increased.

The same increased amount of interest was recorded on Indian, Indonesian, Malaysia markets. The crypto exchanges see unprecedented 10x growth in users from these regions. Aaron Tang (Luno Malaysia) believes that the surge is caused by belief in Bitcoin and altcoins as a safe-haven for storing value amidst uncertainty, economy losses, and extended lockdown. He also added that some investors use Bitcoin to diversify their investment portfolio in case of inflation due to stimulus checks.

According to data from Revault, the number of users grew by 68 percent from April 20th till May 4th.

Summing up the aforementioned statistic it is clear that Coronavirus has significantly affected the global financial markets and made people lose some percentage of trust in fiat currencies. Of course, many crypto assets have also been affected and lost some of its value.

A lot of analysts and crypto enthusiasts try to portray Bitcoin as a safe space for storing value even if the US dollar will experience inflation because of the stimulus checks. But the reality is more complicated. We will have to wait and see. Follow NewsBlockchain to be the first to know about the latest news in the world about crypto.