For a long time, the cryptocurrency industry has its center of gravity in Asia. Most of the world’s mines are located there Bitcoin. What effect did the coronavirus outbreak have on their performance? Will they return to their former glory?
For a long time, the cryptocurrency industry has its center of gravity in Asia. Although initially the countries there were not favorably disposed towards digital currencies. Moreover, they attempted bans. We are talking about China, which attempted last year introduce a ban on mining cryptocurrencies. They eventually withdrew from it after only a few months.
The attitude of the Chinese government to Bitcoin
The Chinese government has nothing else left, given that more than 65% of bitcoin mines are located there. They began to appear on a massive scale in 2017, when electricity prices in Europe and the US increased sharply. Mining in the West, it simply ceased to be profitable.
The People’s Republic of China has a centrally planned economy. It is not surprising that the local rulers did not like the progressive development of this lucrative branch of the financial industry. After all, the main advantage of cryptocurrencies is the fact that they are not subject to any particular state or national banks.
In 2017, the financing of offers was banned in China AND WHATwho sought to create a new one kryptowaluty. In addition, the world went about plans to completely outlaw cryptocurrency exchanges and trading platforms. Then in 2018 came a regulation prohibiting events related to kryptowalutami anyhow.
In April 2019, the Chinese authorities went even further placing mining and trading virtual currencies on the list of industries for complete elimination. The alleged reason was the excessive exploitation of the natural environment and its resources, and the lack of appropriate legal regulations regarding bitcoins.
It is difficult to determine how Chinese mining companies have convinced the government to finally remove their industry from the list. It is possible that this was paid with the promise of help in creating a Chinese cryptocurrency. Such plans also appeared last year, and work is reportedly already underway. Trading platforms and cryptocurrency exchanges operate as before.
Outbreak outbreak and the cryptocurrency market
Since the announcement of the withdrawal of the mining ban in China, course Bitcoin has been growing continuously. Unfortunately, the bull market did not last long. As you might expect, it was interrupted by the outbreak of the coronavirus epidemic in January 2020. With the increase in the number of infected, cryptocurrency prices have fallen.
So far Bitcoin gained during all economic crises. Let’s not forget that the direct driving force behind its creation was crisis of 2008. Probably the decline from the beginning of the epidemic was caused by panic, during which people focused on accumulating cash instead of “uncertain” virtual currencies.
Although in mid-March, Bitcoin fell to the lowest level in a year (1 BTC it was worth 22 414 PLN), since then it has been showing an upward trend again. It is possible that the decline was caused by the appearance of a coronavirus in Europe and a sell-off of the currency again – this time by European investors.
What’s next? In China, the epidemic seems to be dying out. People are returning to normal functioning, workplaces are re-opened. Meanwhile, in Europe, the disease is taking an increasing toll. The world economy is experiencing a bust, which is unlikely to come out quickly.
Is it worth investing now in cryptocurrencies?
The governments of affected countries are facing increasingly difficult tasks. The typical behavior of a society in a crisis is to blame the rulers for it. In turn, their answer is launching social programs to help citizens survive hard times.
Not only in Poland, politicians have promised to give away more money than they have in the treasury. Mints around the world will be experiencing a hot period in the near future. Anyone with a basic understanding of economics knows that printing banknotes is not an ideal solution. Its immediate consequence is always inflationwhich is high enough in Poland.
In the face of the global crisis and the specter of the crash, it is worth investing in instruments that are not heavily influenced by inflation. Gold has always been the most popular of these. Its deposits are not infinite, nor can it be printed like banknotes. Therefore, the value of gold remains stable and independent of economic turmoil.
As you probably know, cryptocurrencies are mined through mining. That’s what bitcoin mines around the world do. Each of them has a certain amount of coins that can be extracted at the time of creation. Thus, rising inflation does not affect cryptocurrency rates, nor does bullion.
What’s the conclusion? Despite very volatile exchange rates, cryptocurrencies are certainly a better investment than the fiat currencies in the face of the crisis. What’s more, the appearance of coronavirus has moved many companies and industries to the virtual world.
The main purpose of cryptocurrencies are, among others hassle-free, fast internet transfers. In China, during an epidemic, more and more online stores began to provide the option of making payments in bitcoins. Further development of internet commerce will definitely have a positive impact on their popularity.
Will we soon be able to pay with cryptocurrencies in every online store? We will probably wait a few years for this reality. However, all indications are that cryptocurrencies – as one of the few – will emerge unscathed from the coronavirus epidemic.