How has the COVID-19 pandemic affected Bitcoin?
Bitcoin was introduced more than a decade ago, and even though it is still in its early days, it is rapidly moving towards becoming fully mainstream. It has already become popular among investors, financial institutions, advisors, service providers, and policymakers, but still has room for growth and wider adoption.
These unprecedented times of the COVID-19 pandemic and the consequent economic recession have brought economic distress but also opportunities for innovation and growth. It follows that a noteworthy rise in interest in the so-called ‘safe haven’ assets was observed in Grayscale’s 2020 Bitcoin Investor Report.
Increased Interest
According to this report, familiarity with Bitcoin is on the rise and so is investment interest this year, as more than half (55%) of the survey respondents communicated their interest in Bitcoin investment products. This is particularly promising, as only 36% of respondents in the 2019 survey have hinted at such interests.What is even more interesting though, is that from those respondents who answered that they had invested in Bitcoin products, 83% had invested in such products/services within 2020. Specifically, 63% of respondents answered that COVID-19 impacted their Bitcoin investment decisions, either positively or negatively, yet most respondents reported investing between January-June 2020.
Bitcoin Investors Motivators
There are multiple factors that drive Bitcoin investors. One such factor relates to the strong perception that Bitcoin is an asset with large growth potential. The report found 59% of total respondents, and specifically 79% of those who already have invested or are strongly considering investing, to be motivated by Bitcoin’s growth potential. This perception was maintained and actually re-enforced in 2020, which surprises those who expected that the COVID-19 pandemic would have a negative impact on the most famous cryptocurrency.COVID-19 on the Investment Industry
The ongoing COVID-19 pandemic has shaken the business world including the investment industry. Stock markets were painted red, supply chains were heavily disrupted, redundancies were made, and companies were forced to shut down. The future seemed dull for investment products yet Bitcoin was able to quickly recover and remain competitive.Figure 1: Simulated Portfolio Performance with Digital Currency Exposure. Source: Grayscale
As mentioned, respondents had been influenced by COVID-19 in their decision to invest in Bitcoin in the first semester of 2020. But was this a positive or negative influence? Results showed that 39% of respondents who had invested in Bitcoin, had been positively influenced by the pandemic, perceiving Bitcoin investments as more appealing, while only 13% found it less appealing.
The explanation is simple. Investors responded that Bitcoin shows similar attributes with traditional safe-haven investments, as it is increasingly scarce, verifiable, uncorrelated to international markets, and decentralized. Such safe-haven investments are very attractive during economic downturns or times of high market volatility, which supports why investors showed a higher interest in Bitcoin investments in 2020.
Future Outlook
Even in unprecedented times of a global pandemic, Bitcoin continues to grow in terms of value and acceptance among the investment community. Investors’ interest in Bitcoin and other digital assets increases year on year. The future of Bitcoin looks promising, as the digital generation adopts increasingly digitized methods of communicating and exchanging value.This year has proven that cryptocurrencies like Bitcoin, can overcome market fluctuations caused by events such as the COVID-19 pandemic. There is hope that investments in Bitcoin and Cryptocurrency Mining can create innovative opportunities for individuals to enjoy an independent income that is immune to market fluctuations and external threats.
Ultimately, after being challenged with the 2020 pandemic, Bitcoin has provided strong evidence that it can be part of a better, more decentralized future.
Published: 12 Nov 2020
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