The novel coronavirus has been upending life worldwide, and cryptocurrencies like Bitcoin have proved far from immune to its impact. On March 12, Bitcoin's value vis-à-vis the United States Dollar dropped by about 40 percent, and other cryptocurrencies fared even worse.
That "Black Thursday" shook the faith of many that cryptocurrency would provide a safe haven in especially trying times. With economies everywhere crumbling as coronavirus infections spread, gold held steady while cryptocurrencies plunged.
Bitcoin, Ethereum, and other major cryptocurrencies have made up much of those losses since. That has happened largely thanks to speculative activity, though, and not the security-seeking pandemic response that many would previously have predicted. Sometime in May, Bitcoin will experience its third halving of block-based mining rewards, adding even more uncertainty to the equation.
Whatever the world looks like after COVID-19 retreats, the position and status within it of cryptocurrency will have changed. There are good reasons to think that some of the ongoing and upcoming developments will prove positive ones, and also ways for cryptocurrency owners to protect their assets until things settle down.
The Global Pandemic Will be an Inflection Point for Digital Payments, Cryptocurrencies Possibly Included
When the Bitcoin network came online in 2009, the digital payment industry was still in its infancy. Even well-established systems like PayPal were mostly used to facilitate online commerce. The first iPhone had launched only a couple of years before, and now-popular apps like Apple Pay were still a long way off.
Bitcoin initially seemed well positioned to make digital payments more accessible to everyone. While the original cryptocurrency gained plenty of traction, it did so by attracting technologists and speculators more so than the general public.
Since then, digital payments have become a lot more common, but cryptocurrency has remained somewhere on the sidelines, by comparison. In China, Alibaba Group's Alipay digital payment app now boasts at least 1.2 billion users.
As the first country forced to fight the novel coronavirus, China has made heavy use of that platform. Going beyond the stay-at-home requests and outright lock-downs that are now common elsewhere, Chinese authorities are tracking residents' movements using Alipay data.
Cryptocurrencies like Bitcoin and Ethereum have lagged far behind the leading commercial digital payment technologies in terms of mass-market adoption. With experts in the United States now proposing tracking initiatives like China's, peer-to-peer, decentralized currencies could soon have another shot at the limelight.
No less a personal privacy advocate than Edward Snowden recently warned that coronavirus-inspired monitoring could become permanent. If that happens, Bitcoin's original promise of putting digital payments out of reach of authorities and corporations could become a lot more attractive to billions. That could end up being the breakthrough that boosters have been hoping for since the beginning.
All Cash is Dirty, and Many are Sick of It
In the meantime, cryptocurrencies are enjoying a surge in popularity for other reasons. Cash bills are notorious collectors of germs as much as grime and illicit substances, making them easy targets for elimination in the age of social distancing.
With non-essential businesses in many places enduring forced shutdowns, grocery stores and pharmacies are looking for ways to enable safer, infection-free transactions. At the same time, governments everywhere are pumping money into economies that have nearly stopped to slow the spread of the novel coronavirus. That has raised the specter of runaway inflation, given that many trillions of dollars are being disbursed worldwide.
That recent economic distress has made cryptocurrency markets far more volatile has not escaped notice. There are signs, though, that unprecedented numbers of first-time cryptocurrency users are coming aboard amid the turmoil.
Pierre Rochard of the cryptocurrency exchange Kraken, for instance, reported a 300-percent jump in month-over-month new-user registrations for March. The number of active Bitcoin wallet addresses also recently exceeded a peak hit back during the currency's 2017 boom that saw its price climb to almost $20,000.
Some of these newcomers have probably helped Bitcoin and other cryptocurrencies claw back portions of their Black Thursday losses. If people interested in cryptocurrency for reasons other than short-term speculation remain invested, the volatility of recent times could calm down, as well.
Staying Safe as a Cryptocurrency Owner in the Age of COVID-19
No one knows how the situation with the novel coronavirus will work out, even if quite a few claim to. The losses and subsequent volatility that cryptocurrencies have experienced since the COVID-19 outbreak surprised many people who think of themselves as experts.
Bitcoin, Ethereum, and the like might not be safe havens, but they cannot be written off, either. Plenty of investors who liquidated cryptocurrency reserves on Black Thursday have been building their positions back up since.
Trying to time any market too aggressively is a fool's errand. Cryptocurrency speculators have driven prices for a long time and will keep doing so.
People who are interested in cryptocurrencies for coronavirus-related reasons and others, though, can take steps to stay safe and somewhat above the fray. Making modest, regular investments to utilize dollar-cost averaging, for instance, is a proven way to lessen the sting of volatility.
Cryptocurrency holders thinking about the post-coronavirus future long term will also do well to diversify and split up their assets. Holding too much at any one exchange or in any single form of cryptocurrency–other than possibly Bitcoin–will increase the odds of devastating losses.
Bitcoin's network-wide hash rate dropped significantly alongside its price. Hashing activity is now picking back up as rising prices make it easier to pay for electricity and equipment.
An especially momentous step in Bitcoin's journey will happen soon when the reward for successfully mining a block gets halved again. COVID-19 aside, the slowing of new currency issuance that results is expected to bolster Bitcoin's value at least a bit.
It could be quite a while before things return to "normal," for both cryptocurrencies and life in general. In the meantime, cryptocurrency owners who stay calm and keep up with established best practices have as much hope as anyone of emerging unscathed.