Posted: August 31st, 2022

Impact of Covid-19 on major cryptocurrencies

Impact of Covid-19 on major cryptocurrencies
On December 19, 2019, the primary confirmed case of coronavirus was found in Wuhan, China. Within the months that ensued, the novel coronavirus continued to infiltrate different cities throughout China. The virus continued to unfold throughout totally different nations, and on March 11, 2020, the World Well being Group formally labeled the virus a world pandemic. Because the virus unfold throughout the globe, governments responded by endorsing journey restrictions and going into lockdown. This disrupted the worldwide financial system tremendously. The inventory market noticed its quickest and most dramatic fall in historical past since 1929.
What adopted was a wave of excessive concern, panic, and uncertainty, which additional prompted the liquidity disaster initially of the disaster. The concern of monetary losses made frantic buyers convert most of their holdings into money to keep away from the huge losses after the anticipated fall within the worth set off. Sadly, the digital forex market, generally recognized for sudden value fluctuations, was not spared. Between February and March, when fears and anxiousness grew, the costs of major cryptocurrencies took a steep fall, most of them dropping greater than half of their worth inside a month.
In response to CoinMarketCap, the entire worth of digital currencies fell from US$308 billion to US$118 billion between February 14 to March 12. To be extra exact, the worth of Bitcoin, the world’s hottest and profitable digital forex by market capitalization, fell from over US$10,000 on February 13 to under US$four,120 by March 12.
Different standard digital currencies additionally skilled a pointy decline in worth. Ether, the second hottest digital forex by market capitalization after Bitcoin, dropped by greater than 66% throughout the identical interval. The same destiny befell XRP, the digital token utilized by the Ripple community skilled a price decline of greater than 66% between February 13 to March 12.
For a while, each digital currencies and conventional shares adopted an analogous path as each noticed a continuing and sharp decline in worth. Nevertheless, within the months that adopted, Bitcoin started recovering and skilled sharp good points whereas the worth of shares continued to depreciate. At this time, the worth of Bitcoin has bounced again, reaching a better worth of 13,400 USD, the best level within the 12 months.
Bitcoin as a secure haven
Someday in 2016, Chris Burniske, a really distinguished and skilled blockchain analyst, argued that Bitcoin might be thought-about a secure haven asset, describing it as digital gold whose worth could be unimpacted by altering financial circumstances. Nevertheless, the decline in Bitcoin’s worth following the concern surrounding the coronavirus pandemic solely questioned the notion of Bitcoin as a digital safe-haven asset.
Corbet, S., Larkin, C., & Lucey, B. (2020). The contagion results of the covid-19 pandemic: Proof from gold and cryptocurrencies. Finance Analysis Letters, 101554.
James, N., Menzies, M., & Chan, J. (2020). Adjustments to the acute and erratic behaviour of cryptocurrencies throughout COVID-19. Physica A: Statistical Mechanics and its Purposes, 125581.
Umar, Z., & Gubareva, M. (2020). A time–frequency Assessment of the impression of the Covid-19 induced panic on the volatility of forex and cryptocurrency markets. Journal of Behavioral and Experimental Finance, 28, 100404.

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