How COVID-19 is impacting cryptocurrencies

How COVID-19 is impacting cryptocurrencies
The COVID-19 virus has had a devastating effect on the global economy. Local businesses, the tourism and manufacturing industry has been hit the hardest. Everyone is feeling the effect of the dreaded pandemic, even in their personal lives. Warnings have been issued against the use of cash as it could transfer the virus to your hands. With that said, this immediately creates an opportunity for digital alternatives. Today we take a look at how COVID-19 is impacting cryptocurrencies and what the future implications can be.

How COVID-19 is impacting cryptocurrencies – The good and the bad

Even cryptocurrencies were not spared the wrath of COVID-19. The crypto market made traders very nervous when it started to drop from $9 000 following news of the virus. That about sums up the bad news. However, Bitcoin is still 20% up for the year to date.

Meanwhile, the outbreak of the pandemic has had a positive impact on several departments of the crypto industry:

OTC trading volume increases

Over-The-Counter (OTC) trading volume has increased significantly over the past 60 days. This is according to data from CoinGecko. Stablecoins especially are benefitting from this volume increase. Stablecoins such as Tether USD (USDT), USD Coin (USDC), Binance USD (BUSD) and Paxos Standard (PAX) are amongst those that have seen a substantial inflow. USDC for example reached a new all time high with $568 million in circulation. This goes to show that investors are looking for safe havens.

Giving rise to cashless payments

Businesses are looking for a safe and fast way to still conduct business despite of several countries declaring a lockdown-period. All the while, individuals are concerned about “dirty money” that could potentially transfer the COVID-19 virus to your hands. Hence, the demand for cashless payments is at an all time high.

America has been talking about introducing a digital dollar, or a dollar-backed digital currency, to the economy for some time. Statistics show that 65% of American families cannot weather an income dip and 50% of small businesses can survive for only 15 days before running out of funds. By implementing a digital dollar system, stimulus funds could instantly be sent to any phone or email address in a safe and secure manner. Looking into the future, the underpinning technology of digital currencies could also lead to an innovative transmission of fiscal and monetary policies.

The digital dollar concept can be applied to any country’s financial system.

Impact on the velocity of money

During times of crisis, people do not spend money as they usually would and this reduces the “velocity” of money. The velocity of money refers to the number of times money is used to pay for products or services. The more times money is spent, the better it is for the economy. Digital currencies could be used to influence velocity by means of offering incentives for consumer consumption. This could be in the form of “cash backs” on purchases.

In the long run, this could even mitigate the need for government bailouts. Especially when it comes to added rebates for specific industries.

In conclusion, despite Bitcoin and altcoins being called a “scam” so many times in the past, it is proving its worth time and time again. With digital currencies money can be send faster and is safer to spent. Be sure to buy your favourite cryptocurrencies on AltCoinTrader and stay safe and healthy.