Why is Bitcoin's price at an all time high? Is it COVID immune?

#blockchain #covid19 #inflation #cryptocurrency #tesla

Ridhi Khurana Feb 18 2021 · 4 min read
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Not only has the COVID19 pandemic influenced how people travel, work, and shop around the world, but it has also impacted the share markets in the US, India, China, and Europe. A great deal of money printing has occurred globally during the pandemic, leading to inflation, which in turn reduces the purchasing power of people. The stock markets were very shaky as well. People understand that the conditions of the stock market depend on businesses that have been affected by the pandemic once again. Many Indians have lost jobs, leading them to invest in cryptocurrencies to earn side revenues. Thus, to ensure that its value is more or less preserved in a deflationary asset such as gold in the traditional system or Bitcoin in the digital system, people move their money. Although rare assets are mostly considered safe at all stock exchanges, the value of precious metals has been somewhat frightening. Bitcoin has a limited supply, and is viewed as a value store. In this space, many new occupations have emerged-people are becoming traders, technical analysts, or crypto influencers. There are different instances of crypto use that have emerged in India and have beneficially affected Indians.

How is Bitcoin protected against inflation?

In contrast to fiat currencies and assets, to preserve their value, there is a fixed number of bitcoins. The blockchain system is designed so that there will always be a fixed number of coins to be mined and there is little chance that economic crises will have any impact on the value of these crypto assets, such as the one caused by COVID19.

To verify the number of bitcoins in circulation, halving is necessary. The Bitcoin value rarely fluctuates immediately before or after a halving event, according to Bitcoin experts such as Tim Peterson. In fact, in most cases, despite economic upheavals and fluctuations of fiat currencies under the Metcalf Law, the value remains entirely predictable.

This legislation uses the idea that a network's worth depends on a network's size. Or, at least for Bitcoin and other altcoins, the blockchain. Therefore, unlike other properties, during these tumultuous and economically uncertain times, Bitcoin is surely a more predictable and safer investment option for those interested in pursuing investment opportunities. Cryptocurrencies are now regarded as a safe-haven asset against market volatility and inflation, especially Bitcoin. The current social and economic climate often produces a condition in which individuals keep less cash and remain hedged against market fluctuations.

Despite the global pandemic wreaking havoc on all significant economies on the planet, the cryptocurrency industry has continued to experience a boom.

During this pandemic, several crypto start-ups have arisen in space to respond to the ever growing demand for Bitcoin and cryptocurrencies alike. CoinSwitch Kuber, for example, recently announced the raising of $15 million (Rs 109 crore) Series A funding from leading global fintech investors such as Ribbit Capital, Paradigm, Sequoia Capital India, and CRED's renowned angel investor Kunal Shah.

The market capitalisation of cryptocurrencies fuelled by Bitcoin's rise has recently reached the $1 trillion mark. Bitcoin, which has been on a bull run for quite some time, accounts for about 69 percent of the total market cap.

BTC price over the last  year

From about $7,000 on January 1, 2020 to about $17,000 on November 27, 2020, and $52,000 as of February 18, 2020 (Today): during the Covid-19 pandemic, bitcoin has soared.

Bitcoin breaks above $50,000 for the first time ever!

We are living through such a multifaceted monetary change that few of us grasp its full scale. The internet's technological transition is driving this revolution. It has been accelerated by the 2020 pandemic. Consider the divergent output of three types of money this year: the U.S. dollar, gold , and Bitcoin, to demonstrate the extent of our ambiguity.

The dollar is the world's favourite currency, dominant not only in the reserves of the central bank but also in foreign transactions. It is a fiat currency and its supply is determined by the US banks and the Federal Reserve. We can quantify its value in relation to the purchasing of commodities by customers, the degree to which it has barely depreciated this year (inflation runs at 1.2%), or in relation to other fiat currencies. On the latter basis, it is down 4 percent since Jan. 1, according to Bloomberg's dollar spot index. Gold, by comparison, in dollar terms, is up 15 percent. Yet somehow the price of a bitcoin in the dollar has increased 139 percent year-to-date.

So what is going on?

First, we should not be shocked that the speed of monetary growth has been boosted by a pandemic.Covid-19 was fantastic for Bitcoin and generally for cryptocurrencies. Next, the pandemic accelerated our advance to a more digital world: in 10 months, what would have taken 10 years was accomplished. For the simple reason that banks were closed, people who had never risked an online transaction before were motivated to try. Secondly, and as a result, our vulnerability to financial monitoring as well as financial fraud has been dramatically enhanced by the pandemic. For Bitcoin, both these patterns have been successful.

So far this year, Bitcoin has risen by about 72 percent, with most of the gains coming after electric car producer Tesla announced it had bought $1.5 billion in it.

By market capitalization, the largest cryptocurrency in the world has become a hedge against looming inflation and low returns on other asset forms.

The price of one Bitcoin was ~6,00,000 only six months ago, and Bitcoin is selling for ~~25,00,000 today, which is around a 400 percent price increase. In terms of market capitalization, Ether, the second-largest cryptocurrency, crossed a record high of over 1,00,000 and increased in value by over 1,000% in one year.

Five reasons why cryptocurrency prices are rising

Why will the asset class of the future be Bitcoin?

Several countries in the EU, Japan, China and India are currently seeing a greater number of investors choosing crypto assets than ever. Europe has shown resolute interest in stablecoins and altcoins in the COVID19 affected financial states.

Bitcoin is here to stay, a greater number of investors believe. For as long as 7 to 8 years, many veterans have been holding onto Bitcoins. The increase in bitcoin's value has not yet decelerated. In fact, as more and more investors hope that crypto assets such as bitcoin have the power to disrupt India's current financial state and other novel coronavirus ravaged economies, the value continues to grow.

The use of bitcoin will reduce intermediaries, create a simple payment, purchase, and settlement network. Bitcoin is the perfect investment tool for both newcomers and seasoned market investors around the world because of its stable and predictable rise in value.

If the rising prices on the crypto market have made you think that investing in cryptocurrencies is too late, realise that this is just the beginning.

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