Cryptocurrencies are used as safe havens for capital This year has left many people economically exhausted due to COVID-19 restrictions. Thi...
Cryptocurrencies are used as safe havens for capital
Cryptocurrency Rally 2020
Bitcoin actually traded for most of 2020 at $10,000 before igniting in late October. Bitcoin closed at $19,382 in November, more than 90 percent in just over a month. Bitcoin so far (YTD) is currently 158% higher than December 2019. These are actually relatively lower numbers than competitors - but less proven - for cryptocurrencies such as Ether (6346T YTD), XRP (6216T YTD), and Stellar (7297 29 YTD). 1 Bitcoin in terms of trading volume and market capitalization is larger than the rest, at over $300 billion, with XRP and Ether closest at $60 billion.
This is where we compare US stocks - measured in the tens of trillions - to put Bitcoin (and the entire cryptocurrency world) in relative terms. Cryptocurrencies are not trying to become stocks, and their status as an alternative value reserve is increasingly being considered by individual and professional investors. Additionally, where it is most important, Bitcoin easily outperformed the S&P 500 and gold futures in 2020.
Bending into chaos
The pandemic has created unexpected winners and losers in various sectors of the economy. However, it was almost universal at the national level. Many countries are opening the financial shutdown trumpet to keep the economy alive long enough for a vaccine to curb the worst of the pandemic. This widespread global financial stimulus has lowered interest rates and real returns. In addition to the general chaos, the fiscal deficits that many governments are experiencing will eventually affect the national economy and shake the future value of their currencies to the ground.
Under these circumstances, Bitcoin's position as a speculative investment appears less than the more stable one. Although there was no centralized management of Bitcoin marketing, it served as a hedge against potential inflation - similar to gold, but digital. Bitcoin's ability to act as a hedge against inflation or as an alternative hedge currency like the US dollar has not been demonstrated, but a number of funds offer only a small stock of risk (generally less than 5%) to Bitcoin and other currencies just for this purpose. Password has been added. Perhaps the backlog we've seen in the past couple of months means that professionals and individual investors have done the same.
Bitcoin in 2020 is a lot different from 2009 or 2017
Although the pandemic, the search for real returns, and the general tendency to invest in shelters have had the greatest impact on the rise of Bitcoin, there is also the fact that, as much as it is generally accepted, it has reached its own limit. Once concentrated primarily among a tech-savvy user, Bitcoin can now be used for everyday transactions such as buying coffee or shopping online. The list of retailers accepting bitcoin (and other cryptocurrencies) continues over time. There are still many fluctuations in the daily value of bitcoin - as evidenced by the March-November low - but that value can be used more easily than ever.
Bitcoin and cryptocurrencies have benefited extensively from the economic chaos of the pandemic and the national bills to be paid in the future. Although Bitcoin has been a known value for more than 5 years, it is still a potential investment and should be treated with caution by individual investors.
The fact that it has increased by acting as a haven for some investors during an economic storm like this shows just how bad this storm is. However, it remains to be seen if this side of the Bitcoin vault will reverse some of the long-term volatility.
