Should I invest in cryptocurrencies during the pandemic?

In recent months, the COVID-19 pandemic has drastically changed the economy’s forecasts, making investors desperately seek security in a market that is continually transforming due to the effects of the health emergency.

Cryptocurrencies – like bitcoin or Ethereum – were created just after the 2008 economic crisis and for several years now have become an alternative for investors, but how much should these instruments be used during this time?

Bitcoin, the most popular virtual currency, has not been without the effects of the health emergency. The cryptocurrency lost 36 per cent of its value on March 12, a day after the World Health Organization declared COVID-19 a pandemic, going from $ 7,696 per unit to $ 4,927.

However, the currency showed resilience, and in the last two months, it exceeded the value it had days before the pandemic was declared. Last month it was listed at $ 8,800, a value 78 per cent higher than that registered in January (before the pandemic was declared).

As a result of the development of blockchain technology, more and more cryptocurrencies have been created in recent years, with Bitcoin having the largest market capitalization, greatest liquidity, and the longest track record. But despite the growing interest in this and other cryptocurrencies, the current solutions to invest in Bitcoin are complicated for most investors. Also, it should be noted that Bitcoin is an asset prone to significant risks, such as high volatility. However, it can also provide investors with diversification, given that its price would be initially unrelated to that of assets such as the stock market or fixed income. This recovery has not been imitated by other assets, such as oil, whose price is well below recorded in the first months of the year.

Although bitcoin suffered a violent fall in March of more than 60 per cent when all markets fell, it has been recovering and is now the best performing asset in 2020. This shows how the correlation of bitcoin with other traditional assets is often temporary.

The conjuncture of millions of lost jobs and multimillion-dollar economic packages generates uncertainty due to not having solid support, which is why global investors target safe-haven assets such as bitcoin or gold to preserve value, protecting themselves against high inflation scenarios.

Other currencies such as Ethereum have also seen favorable growth recently, although they have not yet surpassed their pre-pandemic price. It was recently listed at $ 190, but after the pandemic was declared, its value dropped from $ 195 to $ 109.5. Likewise, with other cryptocurrencies. They tend to be increasingly in demand, regardless of how unique they are and when they are “stated in the market.”

Opportunities

Making good profits depends on the time when you entered this market. In the investment world, the time to start is very important, and the earlier you start, the greater the potential profit you can get. To understand how investment trends are in Bitcoin and other cryptocurrencies, you need to use tools such as the Bitcoin revolution.

It all depends on the moment you enter (to buy these assets) to obtain or not returns. In the last six years, it has had a yield of 3 thousand per cent; if you started three years ago, it is a very attractive investment vehicle, so far this year the return is 37 per cent.

It is quite attractive in the current situation to start investing in this type of cryptocurrency, as it is an alternative to the traditional system.

Within virtual currencies, there is a segment called stable coins – like DAI and Tether – that are more stable assets than other cryptocurrencies. That will protect their value if the local currency falls against the dollar. How you can access this type of financial service known as Defi or Decentralized Finance is through smart wallets and cryptocurrency exchange platforms.

To take into account.

 – Cryptocurrencies are virtual currencies that are created and stored electronically, as defined by the European Central Bank.

 – The difference with conventional ones is that any government does not regulate them, so investing in them is highly risky.

 – Its value is determined by supply and demand and is usually very volatile, with large changes in hours.

From the above explanation, it can be concluded that the cryptocurrency is the future of global investment. But what is evident is that blockchain technology and cryptocurrencies cannot be ignored, and the financial industry has understood this. The interest of investors and curious about Bitcoin has not stopped growing in recent months as its price did, so various weight entities are beginning to launch products that allow investors to have exposure to the assets of fashion.

Photo: Dmitry Demidko, Unsplash