The COVID-19 pandemic has affected people and businesses profoundly. As job cuts sweep across industries and companies move to cut back on costs. Everyone from titans of industries to ordinary workers—are bracing for the worst. But some are also choosing to see where the opportunity lies in these hard times.
Market turmoil is often an indication of how challenges pave the way for growth and point to areas of the economy that show promise. One growth area in the pandemic is the market for cryptocurrency, particularly Bitcoin (BTC), which was originally designed to thrive in a digital economy.
Investors who see the potential of cashless transactions are pivoting to crypto as a crucial aspect of life post-pandemic.
Is Bitcoin Just a Speculative Asset?
Blockchain as an innovative code system has helped to achieve Bitcoin founder Satoshi Nakamoto’s vision of democratizing access to and streamlining control of one’s assets.
But the potential of cryptocurrencies to upend the concept of money in the digital age has also attracted investors who only want to make a quick buck through speculative trading.
Market observers and financial technology leaders had already been keeping an eye on investors who were using BTC as a safe haven in the event of another financial market crash. What they found was a heterogeneous mix of people entering the crypto space.
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In an interview with CNBC in 2019, Luno CEO Marcus Swanepoel said only one in 10 people on his cryptocurrency exchange used BTC for transactions. The majority treated the currency as an investment more akin to “digital gold.”
Fast forward to 2020, and investors have found that the challenges of the COVID-19 global health crisis are accelerating the shift to digital currencies.
The financially savvy who were betting on crypto when prices were comparatively low in the early months of the pandemic have seen their investments rising steadily.
Should You Invest in Bitcoin amid the Pandemic?
Like traditional markets such as oil or real estate, Bitcoin and other cryptocurrency markets aren’t immune to the shock of the ongoing pandemic, but the impact hasn’t entirely been negative.
Industries that rely on physical assets have mostly seen a slowdown in business and social activity. In contrast, digital assets and cryptocurrencies have been buoyed by an increase in liquidity in recent months, as governments pump cash into the economy through coronavirus stimulus packages.
Because cryptocurrencies are exchanged on virtual platforms, the market continued trading even when entire sectors shut down to stem the tide of COVID-19 transmissions.
As governments work to slow the spread of the virus, consumers are opting to minimize physical contact in their day-to-day business by using cashless transactions. This is where digital currencies come in.
With social distancing measures in place, contactless and virtual payments as seen in BTC transactions are fast becoming the world’s most convenient payment methods.
For businesses looking for a faster way to transact with clients and partners overseas, peer-to-peer transactions using digital currencies offer faster, cheaper and more direct borderless transfers.
Which is the Best-Performing Asset?
While Bitcoin has earned its place in history as the world’s first cryptocurrency, similar iterations, known as Bitcoin Cash and Bitcoin Satoshi Vision (which goes by the shorthand Bitcoin SV), further improve on aspects of the original.
Bitcoin SV, for example, expands the volume of transactions processed in a single block from Bitcoin’s 1MB to 128MB. Meanwhile, Bitcoin Cash’s block size limit is currently at 32MB.
This makes Bitcoin SV superior to the first two iterations in terms of keeping track of transactions. For merchants and end-users, the feature also makes transacting on Bitcoin SV 11,000 times cheaper than on Bitcoin.
The three types of Bitcoins are distinguished by their purpose. Bitcoin functions like gold in that users tend to profit more from holding onto the asset over a period rather than spending it.
Bitcoin Cash works like money exchanged in everyday peer-to-peer transactions, such as purchases or fund transfers. Bitcoin SV, meanwhile, more closely follows Satoshi Nakamoto’s vision of a simplified borderless currency system.
While older generations tend to buy gold and silver as one of their most tried-and-tested safe havens of wealth, younger generations are exploring digital currencies as one of their first big investments. But which asset performs better?
An analysis of the year-on-year growth of different asset classes showed the best-performing asset to be Bitcoin SV. Measuring Bitcoin SV performance between Q1 2019 and Q2 2020.
Investors witnessed the value of the cryptocurrency soar 147.5%, yielding seven times the return on gold and almost thrice the value of its predecessor bitcoin.
If you are betting on the continuing rise of virtual currencies, then investing in assets such as Bitcoin, Bitcoin Cash or Bitcoin SV may be the right investment move for you.
Considering how the high-risk market tends to yield high rewards, it’s tempting to ride the current fascination as a way to get rich quickly. True crypto enthusiasts, however, look at growth in the long term, well beyond the pandemic.