What’s the Latest Going on in The Cryptocurrency Market amid the Coronavirus crisis?

Cryptocurrencies continue to be a mystery and their establishment as a formal asset class is still in doubt as many of the governments of the world including that of developing countries like India and China have refused to support such currencies. Equity, on the other hand, has never seen a lack of interest from the investor classes in its history with the value that it has created in the past only making its importance to the economic development of our societies and countries deeper and more profound.

Latest Developments in the Crypto Market

In the year 2017, Bitcoin (BTC) valuations were on a high that was never seen before. At its peak, it was valued at US $19,783 in the spot cryptocurrency market. But it was all as financial experts argued about the fundamental or underlying value behind bitcoin, the prices started tumbling and people who were investing in the cryptocurrency at the time had to bear a lot of losses. It was a point of exit as price drops in all other cryptocurrencies also followed. In the middle of the year 2019, when a massive trade war between China and the United States of America was going on, and at the same time global stocks were also suffering, Bitcoin made a subtle comeback into the minds of the investors.

Bitcoin’s price again turned extremely volatile in the middle of 2019, as many experts of both the financial markets and the blockchain technology stated that Bitcoin is very unstable. A lot of experts though have missed out on the most important factor here, that the bitcoin, as well as other cryptos, were based on system stability and not price stability and hence will continue to remain volatile even in the future. When it comes to trading, Bitcoin is the quite the pole opposite of regular currency based assets, which normally are known for the feature of stability in prices but at the same time are volatile because of seasonal or market movements as well as economic cycles of countries.

Recently, in the midst of the chaos that has been caused by the Coronavirus outbreak, bitcoin has once again started showing signs of stability after suffering a huge slump in the middle of a wider meltdown of the global markets. In trading this week, the biggest tech-based currency has recovered from small sessional lows and continues to move upwards. As per reports, this a symbolisation of the fact that the crypto might have bottomed out after a 30 per cent decline in the last one month.

On 26^th March 2020, the prices of Bitcoin in the spot market were up to around US $6,237 as of 06:12 p.m. Greenwich Mean Time, while Bitcoin Cash also surged by upwards of 20 per cent in a single day. Other cryptocurrencies like the Litecoin and Ethereum were also reportedly up by 10 per cent, as cryptocurrencies enjoyed a good trading day in terms of prices.

Other cryptocurrencies were also on the lower side in the last one month but are now showing certain signs of recovery as people are likely to move away from riskier assets and businesses, that have been hardly struck by the blowback from the Coronavirus Crisis.

The reason behind this is being said to be the fact that bitcoin can be accessed remotely, and nobody really needs to go out to buy or spend bitcoin, meaning that in these turbulent times, when all the other assets and parts of the financial markets are not doing very well, Bitcoin, as well as other cryptocurrencies are looking attractive to investors, because of their virtual presence.

Cryptocurrency and other Investment options

Cryptocurrency, an encrypted, peer-to-peer network for facilitating digital barter system, was developed as a disruptive technology to supersede long-standing and unchanged financial payment systems that have been in place for a long time. While cryptocurrencies would not be able to replace traditional fiat currencies any time soon, they could, however, clear away many barriers surrounding normative national currencies and exchange rates and change the way Internet-connected global markets interact with each other.

Amongst all the conventional financial securities, equities are considered by many as offering the highest risk-reward potential. Equities, which have the performance of the representative companies as their underlying, increase or decrease in value as the fortunes of the companies go up or down. Its origin dates back to the periods when the need was felt to pool contribution in order to create businesses to exploit natural resources and provide employment at a time when individual resources were not sufficient to support such an endeavour. Most of the major non-governmental corporations that we know today are public companies who have contributed to the creation of immense wealth and employment for countries in the past. Equities thus hold a very important place not only among financial assets but as instruments that bring about social and economic developments both on an individual level as well as for the society and country at large. Governments world over work tirelessly to promote equity investments and take measures to protect the interests of investors. There are stock exchanges where equity investors can buy and sell shares at ease no matter what their financial status is and contribute to the economic development of their individual countries.

One of the primary features or characteristics of a financial instrument or a currency for that matter which derives its value is the assets backing for such a security. For equity security the asset backing is the nominal value of the share represented by a certain unit of capital which is again supported by the earnings performance of the company, which represents those shares. Debt securities are backed by the units of capital that are represented by the face value of the instrument, which is further backed by the financial standing of the company or the institution issuing the instrument. Currency is backed by the guarantee of a sovereign government which is further backed by the strength of the economy of the country and it’s relative financial standing among all other countries of the world. A cryptocurrency, however, suffers from the backing of an underlying, or if there exists; it lacks a legal or statutory backing that would ensure its enforceability. Even the corporations that are promoting such currencies are not willing to create legal claims on themselves for such currencies (doing so will make it a debt instrument).