Over the last few months Coronavirus has affected everything from lifestyle to businesses. Unsurprisingly cryptocurrencies are affected as well, especially due to the looming threat of an economic fallout.
But how is the Coronavirus and its economic fallout really affecting cryptocurrencies? To be frank – its impact is being felt across the board.
Not Exactly a ‘Safe’ Haven?
In the past many people felt that cryptocurrencies were a decent ‘safe haven’ during times of economic uncertainty. The cryptocurrency market generally reflected that, and the demand for Bitcoin and other popular cryptocurrencies would normally increase.
Unfortunately over the last few months that belief has been challenged. Not only have Bitcoin and other cryptocurrencies not appreciated in value, but they’ve actually dropped somewhat precipitously instead.
Admittedly the drop in Bitcoin’s price is also due to other factors such as the plummeting price of oil, and so on. And since the middle of March the price has started to appreciate again.
Overall however most cryptocurrencies are far too volatile to be regarded as a ‘safe’ haven.
Struggle to Raise Funds
Another problem that is faced by new cryptocurrencies is the fact that raising funds has become a struggle. Ever since the ICO bubble seemingly burst in 2019, most cryptocurrency startups have been relying on venture capital and other forms of investments.
However, the outbreak of Coronavirus has put the brakes on all that. Not only is it difficult to hold meetings and pitch to investors due to social distancing guidelines, but most investors are adopting a more passive approach and are not willing to take on any unnecessary risks.
In short, the flow of money into cryptocurrency startups has been slowed to a drip, and that will affect the sustainability of many projects.
It should be noted that this is the case in many niche markets, and it is likely to continue until investors feel safe and the economic outlook starts to appear more positive. It is impossible to tell when that will happen until things begin to get back to normal however.
What Does the Future Look Like?
As things stand it is almost impossible to extrapolate how the cryptocurrency market is going to look by the time the Coronavirus pandemic is brought under control, and the economic fallout is dealt with.
For now it is expected that the price of cryptocurrencies will continue to be volatile in the near future. That is mainly due to the fact that many traders are extremely risk-averse right now, and are likely to panic and sell at the first sign of trouble.
On the investment front, things may only start to move forward after social distancing is no longer a requirement. However even then it may take months or even a year before everything is normal.
Most investors will probably be extremely discerning about where they put their money in the short term, and what risks they take on. Some startups that have limited funds may very well be forced to close due to how difficult it is to attract investors right now.
Final Words
If you’re involved in the cryptocurrency market in any way, the best thing to do is to keep a close eye on it. Find a decent Bitcoin trading platform that you can use, and monitor the movement in its price over the next few weeks.
As governments begin to reopen and people are able to get back to their lives, it will likely have a positive impact on the cryptocurrency market as a whole. However there is no telling when that will happen exactly.
Image(s): Shutterstock.com