Did COVID-19 Help or Hurt the Case for Cryptocurrency?

The cryptocurrency market remains uncharted territory for many investors and businessmen. This is due to the sheer size of the market, with its multiple cryptocurrencies, and its volatility. Recently, however, there’s been a shift, as more entrepreneurs have become more willing to put their money into crypto. Bitcoin and Coronavirus, in particular, seem to be a pair often talked about.

In fact, a recent report on CNBC states that ever since the Coronavirus Bitcoin values have been on the rise. This is because big investors started purchasing it. Now, the value of a single bitcoin is over $30,000, making it a more appealing option for mainstream investors. How much of this apparent surge is due to the effects of the pandemic?

But note that it isn’t just Bitcoin Coronavirus has affected, but cryptocurrencies all across the crypto market. In this article, we’ll be laying out the positive and negative effects of the interplay between Coronavirus and cryptocurrency.

Upsides

The current health crisis has revealed various weaknesses in different sectors of society — issues that can be remedied by cryptocurrency. For instance, with the global lockdown measures, it’s become difficult to move money around, and many people have had to enlist the services of fintech businesses. Unfortunately, traditional means of sending money come with steep currency exchange and service fees. The use of cryptocurrency to facilitate these payments lowers the cost, and makes transactions faster, cheaper, and more reliable.

On the legal side, the COVID-19 pandemic has also led nations to legislate laws around the use of cryptocurrency. A Bitcoin legality report on FXCM points out how the world’s largest cryptocurrency enjoys a legal status in some of the world’s largest economies, like China, the US, and Germany. This is a huge step forward, as cryptocurrencies used to be unregulated, with some countries outright banning their usage. Hopefully, this change paves the way for more crypto-related opportunities, some of which are already taking root in the business sector.

In the realm of business, the legalization and growing accessibility of cryptocurrencies make it a more appealing investment. Companies are likely to be more willing to use it, while traders will be more open to investing in it. Another one of our articles here on the Merkeleon blog previously talked about the crypto industry and how entrepreneurs have multiple business opportunities in this sector, especially given its steadily increasing values. And with the global economy plummeting due to the COVID-19 pandemic, the value of cryptocurrencies has largely proven to be more stable than fiat currencies. They could, then, become a useful hedge in times of crisis.

Downsides

But, of course, the boom in cryptocurrencies amid the current pandemic has its fair share of downsides. One of them is the increasing number of cyber threats surrounding the marketplace. The Balance published a list of the five most common cryptocurrency scams that people should look out for. Among them are fake cryptocurrencies, where fraudsters convince you to invest your assets in a “Bitcoin alternative” then disappear with your investments. Scams like these are, in part, the reason why governments have imposed stricter legal measures on the use of cryptocurrency.

And while not necessarily a downside, governments and finance professionals need to ask themselves if they’re ready to incorporate cryptocurrency into their internal processes. Yes, it is a convenient and effective option for handling assets, but it comes with a whole slew of considerations. Institutions need to put up new cybersecurity and privacy policies, while also adapting to the paradigm shift in financial services. If these are not handled well, it could end on a sour note for the institution and its constituents.

While it’s clear that the pandemic has put a spotlight on cryptocurrency, the effects of this are varied. It poses benefits like increased accessibility and more financial options, but also complications like increased cybercriminal activity and the difficulties that come with institutions transitioning to more crypto-friendly services. So, take note of these effects when deciding on whether to take part in the cryptocurrency sphere.

If you’d like to take it a step further and start a crypto-based business, you’ll need a secure means of sending and receiving payments. Merkeleon’s crypto processing and wallet software is an excellent choice for this, able to support more than 50 different types of crypto assets and fiat currencies. It also offers crypto-to-fiat and crypto-to-crypto exchange options, so make sure to check it out today!

Article specially prepared for merkeleon.com
Prepared by: Jennifer Birch