Cryptocurrency activity has not been quiet lately. Its rise to the monetary value ladder has reached milestone after milestone and it does not seem to be stopping anytime soon.
Many predictions were made by investment analysts, experts, and even crypto market fanatics over the last few months as the charts have shown the promising behavior of Bitcoin’s prices mimicking that of its 2016 historic breakthrough. However, so far it has not lived up to their expectations just yet.
Bitcoin recently basked in the sunlight after surpassing $12,000 mark, but it was short-lived.
On the bright side though, the total market cap of the market shot up to more than $380 billion - last achieved way back in 2018. A couple of factors are seen to be affecting the status of Bitcoin from reaching its fullest potential. “Poor investor perception” and “lack of regulatory direction” are among the reasons that hinder the market’s progression and keep the predictions of participants and spectators from becoming reality, according to Cointelegraph.
Sam Tabar, co-founder of Airswap (an Ethereum token trading platform) and former director of the Bank of America in the APAC region, has faith in the long-term benefit of Bitcoin, but also thinks that it is not immune to highs and lows similar to any other newly-emerging assets with huge potential. But what really holds back other conventional market investors from joining the cryptomarket is the instability of information. Whales, albeit silent are the ones with the most control of the market, and their capitals trigger the rise or fall of the market. While market fluctuations are alright, asymmetrical information is unjust.
COVID-19 prevents the demand on cryptocurrency as it is responsible for the global economic decline that the world faces today, says Ariel Zetlin-Jones, an economics professor at Carnegie Mellon University. It does not come as a surprise that investors are hesitant in putting their eggs in the Bitcoin basket, seeing as the market is not entirely stable.
The US dollar
The dominance of the US dollar as a global reserve currency remains intact despite the pandemic. As long as the USA remains a leading nation, this will not change and the value of the American dollar will stay above the monetary charts.
Recently, the performance of the American dollar hit a few bumps. The index of USD is at 93.20%, a significant drop from its 102.75% peak between March and April. As a the reserve currency held by foreign banks, its value increases in an economic adversity, making its performance difficult to monitor and analyze. Political tension and dollar-printing are making the possibility of hyperinflation more likely in the future.
Crypto is performing well
Pessimists are constantly pushing BTC’s failure to achieve exponential surges and reach record price highs even though the economic status is optimal for such an activity. However, the market is having a generally good year.
Ether (ETH) had increased value fourfold, from $105 to $440. Bitcoin rose by 72%, Ripple by 50%, and Dash shot up to 124% after major downfalls in the early months of 2020. Other cryptocurrencies that are less popular are also growing by three-digit percentages.
Tabar attributes this to the integration of BTC in the investment portfolios of some offices. Revolut neo-bank and investment applications like Robinhood are also allowing a more convenient access to the cryptomarket. Younger investors will play a major role in permanently putting cryptocurrency as a legitimate investment.
Compared to the usual tangible commodities, Taylor states that crypto beat the value of several precious metals. Bitcoin also exhibits better prices than oil, which dropped its prices because of the pandemic’s effect on the economy. The numbers show a 32% drop in oil prices.
“Other precious metals are generally below 40% returns, especially if they have industrial uses.”
Crypto in the future
Uncertainty. Unpredictability. Those are words that describe the cryptocurrency market. It’s still too soon to tell, but Taylor says inflations are expected to rise in the coming months. As a result, investors will begin to appreciate the allure of digital assets because of their immunity to such circumstances.
Technological challenges are still in the way of the public engaging in the cryptocurrency market. Opening a digital wallet or signing up for a crypto trading account is not that easy to perform. The easiness of the digital aspect of it all will eventually come, but it will take time to develop and for people to allow that into their financial dealings.
People often fail to consider that Bitcoin has only been in existence for 11 years, so not much is to be expected from it even though it has shown incredible performance in that span of time. Cryptocurrency has proved its competence during trying times of the global economy, but it is still a financial risk that only those who are willing to lose a lot are able to take.