The world has been currently experiencing one of the most critical social and economic crises and just like the traditional stock market, cryptocurrency may appreciate or depreciate due to an investor’s sentiment with regards to changes in the global news relating to the market or world on a whole. Herein, we will assess the impact of the pandemic on cryptocurrency and how it is shaping to move forward post the pandemic.
To assess the impact on the market, we must look at the impact from the advent of the pandemic and the impact on cryptocurrency during the pandemic. Around 8th of March 2020, due to the announcement of the pandemic and constant lockdowns/quarantines around Europe and the world, there was a massive sale of stake in cryptocurrency and that led to a loss of a total of $21 Billion dollars in total market capitalization, and also affected the stock markets around the world, badly. In the coming days, around half of the market capitalization value and prices of major cryptocurrencies collapsed.
However, with the world moving towards a more digital approach and cashless transactions, the trust within the cryptocurrency market increased in the eyes of investors during the pandemic. This led to an increase in market liquidity as many investors looked at cryptocurrencies as safe havens during the pandemic, the situation of the market slowly started reversing with the market fully recovering by the End of May 2020, with further bullish trends in the market reaching a market capitalization value of almost $760 billion dollars by December 2020.
This rise in the prices was looked at by many in a skeptical manner, as cryptocurrency was flourishing during the pandemic with many investors only interested in short term gains by diversifying their investment portfolio in cryptocurrency to cover up losses incurred in other investment and business avenues. Major cryptocurrencies like Bitcoin and Ethereum were looked at as a store of value during the pandemic. While this led to a rise in the price of major cryptocurrencies, it also can be a cause for tension with regards to the ever-growing concern of volatility within the market.
It can also be seen that, various major cryptocurrencies like Bitcoin, Ethereum faced high levels of volatility during the pandemic, due to the different news about the pandemic, like rising cases or deaths, or new variants, just like a traditional stock market, such news breeds fear in investors to put their hard-earned money into the markets. Further, the unregulated nature of the market puts a doubt in the mind of people during the pandemic and only will be able assess the total impact on cryptocurrency post the pandemic.
Without regards to the impact on the market, cryptocurrency, blockchain, DeFi, and other such decentralized spaces have gained further trust in the eyes of people. Here, the challenge that occurs is how will such attraction remain in cryptocurrency post the pandemic and the answer is regulation and awareness. Hence, we at WACEO recognized the need for an organisation that supports and advocates for regulation in the Decentralized space and also provide support to DAO’s in terms of understanding their governance, structure, providing a legal backing. Further the governments and bodies around the world must find a way to regulate the market in a way wherein they can maintain transparency without hampering innovation and increase trust of people within the market.
Conclusion:
The pandemic accounted for many new investors in the market and hence it is important to bring about regulations and trust in the market, so as to reduce the volatility, which would further ensure that such investors continue to enjoy usage of cryptocurrencies post the pandemic. This can be done only if similar regulations are made around the world by relevant authorities, to ensure that the cryptocurrency market is being used for the right reasons, while trying to negate all the negative aspects of cryptocurrency. This would help strengthen the market, provide trust and transparency and reduce the high volatility and interdependence of cryptocurrencies.
Further there is need for awareness within the market and otherwise with regards to cryptocurrency and the decentralized space on a whole, to further provide a better understanding of the governance and legalities of the same. WACEO can come into play here, as we help various stakeholders and people interested in the decentralized space of DeFi, DAO and Cryptocurrencies, etc with regards to their governance structures, legalities and awareness of the same. Our aim is to ensure that the blockchain space on a whole is regulated and that the organisations in it are compliant with the laws while being able to enjoy their decentralized status.
