How Has Covid-19 Affected The Future Of Cryptocurrency?
True believers in cryptocurrency being able to replace fiat have been waiting for the day that their theory could be tested. What needed to happen was some type of event that would stress traditional currency issued by banks and governments so they could see how cryptocurrency could hold up.
Since there is no authority over cryptocurrency, the thinking was that it would show the world that the status quo doesn’t work anymore and it was time to switch to decentralized currency.
Well, with Covid-19 ravaging the world’s economies, it seems the moment of truth for bitcoin has finally arrived.
In this article, we will go over what the latest developments are and how the future of cryptocurrency may be headed.
Before Bitcoin had been invented, people wary of the boom and bust nature of modern economics were often occupied with buying gold. Nowadays, they are doing the same thing except looking to buy Bitcoin with cash. The theory is that gold or cryptocurrency would provide some stability against rising inflation.
Sort of like gold there is a fixed amount of bitcoin that can be mined which makes it less likely to show any signs of inflation. The biggest difference, however, is that we know how much bitcoin is left to mine whereas gold undiscovered doesn’t allow us to see how much is left.
It is widely thought that cryptocurrencies are very volatile, and they certainly can be, however there are mechanisms in place to make them more predictable. Halving the blockchain is one of those mechanisms. This is when the currency given to a miner is halved so it influences the value of the currency.
Since many governments are dumping loads of cash into the economy, inflation soon follows.
Will it become a mainstream asset?
The volatile nature of bitcoin and other currencies was what was attracting many new investors. Speculators love volatility as they can sell short and make some quick money if they time it right. However, there are far more bitcoin holders that have not sold off their coins after years of holding.
Those people have seen the value rise over the years with no sign of slowing down. At this point, there are many investors who are eager to protect their assets and are buying bitcoin to do just that.
Because there is no need for an intermediary like a bank or government, bitcoin has shown a lot of practical value as a currency as well as being an asset to protect other assets.
And since there are blockchains that have smart contracts, even non cash assets can be protected and kept secure making other currencies like Ether very attractive too.
The bottom line
As is the case with many commodities that attempt to store value through recessions, bitcoin has shown that it can be a safe haven for many people. And like other commodities, it should be part of a balanced portfolio so that if it does crash it won’t have the holder lose all of their money.
*This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be, investment, financial, or other advice.