The coronavirus scare has had a substantial impact on the global economy and financial markets.
it forced many businesses to shut their doors and caused asset values to decline.
Digital currencies have also been affected, falling in value and therefore moving in the same direction as more traditional assets.
The idea that COVID-19 has brought about two pandemics, not just one.
- The first is COVID-19 health pandemic.
- The second, a pandemic of anxiety over the economic consequences of the first.
These two pandemics are interrelated but are not the same phenomenon. In the second pandemic, stories of fear have gone so viral that we often think of them constantly. The stock market has been dropping like a rock.
The digital currency markets are notorious for experiencing sharp price fluctuations as well.
The Rise and Fall in Cryptocurrency Prices
A glance at the cryptocurrency trading over the past months shows that the market has been highly volatile.
Crypto markets have seen a boost as a result of the tensions between the U.S. and Iran and then gained arising from the fear of the coronavirus outbreak.
More specifically, the total market value of digital currencies tracked by CoinMarketCap fell from US$308 billion on 14 February to less than US$118 billion on 12 March.
Other digital suffered declines as well, with Ether, the second-largest digital asset by market capitalization, falling more than 66% between 14 February and 12 March, according to CoinMarketCap.
XRP, the digital token used by the Ripple network, experienced a similar drop, losing roughly 66% of its value during approximately the same time frame.
The Stablecoins Benefit
One class of crypto that has greatly benefited from the spread of Coronavirus is Stablecoins. This class of cryptocurrency has witnessed an increased interest after the outbreak of the virus. The reason behind this is that stable coins have less price volatility in comparison to digital coins.
Also, people have more confidence in the future value of Stablecoins than in bitcoin or other digital currencies.
The Stocks prices:
At some points, digital currencies and stocks moved in the same direction as both fell in value. However, this relationship broke down at other times, with Bitcoin experiencing sharp gains while stocks failed to rally.
By March 2020, all major stock market indices lost value due to the COVID-19 pandemic sweeping across the globe.
Asia was the first source of the outbreak.
concerns about the spread of the disease have led to the current downward market trend. The values of the Shanghai Stock Exchange Composite Index and the Nikkei Stock Average index have plunged in the wake of the pandemic. Japan’s economy was dealt a further blow with the news that the Tokyo 2020 Olympic Games will be postponed by up to a year.
COVID-19 has struck fear into the heart of the economy in the United States.
The Dow Jones Industrial Average index has reported some of the biggest single-day gains and losses of its history, reflecting the highly volatile nature of the financial markets. stocks plunged into a bear market after the United States President banned travel from Europe to stem the coronavirus. The S&P 500 index and the Nasdaq Composite index have also battled to stay afloat in such rough waters.
In Europe, the Financial Times Stock Exchange 100 index suffered its steepest one-day fall since 1987, and stock exchange indexes in Latin America also dropped dramatically as the coronavirus started to spread across the region.
As events unfold, most analysts warn that the full impact of the coronavirus outbreak is yet to be felt. By both the traditional financial markets and cryptocurrencies markets. Despite these projections, there is the certainty of recovery.
While the possibility of an immediate recovery may disappoint many looking for quick riches, cryptocurrency digital asset class is here to stay. Thus it remains questionable if cryptocurrency’s pandemic status eventually will appeal as a “safe haven” asset.