Western governments are fighting COVID-19, isolating entire cities and nations. Therefore, people feel an urgent need to get out of a centralized financial system. The crisis is increasing the popularity of cryptocurrencies in the world. According to reports from Crypto Event, some people thought that Bitcoin would act as an alternate currency during the crisis, but it seems to be failing. The article will discuss this topic.
The COVID-19 epidemic not only tests the network for strength but also pushes the crypto community to ambiguous creativity. As for the reference coin – Bitcoin, then last week its price exceeded the mark of $7 thousand, which inspired optimism in the merchants. In general, the cryptocurrency market capitalization has grown to $ 189 billion.
Market participants predict a further increase in the value of bitcoin. For the next week, analysts’ forecasts provide a corridor in the range of $6.8-7.3 thousand for 1 Bitcoin.
The main argument in favor of growth is the actions of the US and EU central banks in pumping up economies with nothing to back up money. Experts point to the risk of depreciation of the dollar and the euro. The expectation is that this should increase the value of cryptocurrency because central banks do not regulate it.
Hopes are also connected with this that the crypto will establish itself as a safe asset for investors in case of shocks.
However, the same has not yet happened. On the contrary, the suspicions are confirmed that the price of crypto assets correlates with prices in traditional markets much more than was previously assumed.
The recession triggered by the coronavirus pandemic in the global economy, as well as collapses in the global financial and stock markets, ensured, according to Western analysts, “the defeat of cryptocurrency.” According to the results of the first quarter of 2020, the price of Bitcoin fell by 10%. This exacerbated the intrigue about whether the cryptocurrency is able to cope with the task of an alternative safe haven.
True, in the conditions of an ideal storm, many adherents of the crypt counted on an increase in its value. In this case, Bitcoin would behave as gold behaves in turbulent times. Gold continues to fulfil its role as a safe asset. And this is facilitated by the already mentioned unprecedented monetary measures of the USA and the EU, as well as the reduction of yellow metal production in connection with the epidemic.
March 2020 turned out to be a nervous month for investors, as well as one of the worst months in the history of cryptocurrency. Investors fled from risky assets, including cryptocurrency. Thus, they showed that Bitcoin for them is far from being a safe haven.
It was rather typical for investors to get rid of crypto assets at a high price in order to receive live money and cover losses in other areas. In March alone, Bitcoin lost about 25% of its value, the price of one coin dropped below $6.5 thousand.
Having to be the salvation for Bitcoin
Nevertheless, the cryptocurrency has every chance of winning back the losses very soon. It’s all about the upcoming halving – the moment when the size of the reward to miners for adding a new block to the blockchain will be halved.
This procedure is implemented at the software level and occurs in the Bitcoin network every 210 thousand blocks (approximately once every 4 years) – until the moment when 21 million coins are mined, and the issue is completed. Halving has already happened twice: in November 2012 and in July 2016.
Why is it so important?
Halving is essential because it regulates the emission of cryptocurrencies and restrains its inflation. On the eve of the first halving, which took place in 2012, the creator of the Ethereum cryptocurrency Vitaly Buterin explained the importance of this procedure by the fact that it brings bitcoin closer to gold in its characteristics: “Gold reserves in the world are limited, and it’s becoming more and more difficult to get the remaining gold with each mined gram. “. In the case of cryptocurrency, halving provides the same principle when the complexity of the calculations for creating a block, and therefore the cost of equipment and energy costs increases and the reward for the block falls.
While we hoped for Bitcoin to act as an alternate currency during the crisis, it has not happened yet. Bitcoin suffered greatly and only in the recent period it managed to get back its “reputation”. There is a bit too early to speak about the outcomes, but it does not look like, Bitcoin will do something for countries.
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