Is Crypto Driving COVID-19 Recovery?
Despite the economic recession caused by COVID-19, the demand for Bitcoin and other cryptocurrencies has surged these last two years. Although this growth isn’t without potential drawbacks, emerging economies are increasingly looking for ways to leverage cryptocurrencies and drive recovery while controlling the economic impact of the virus.
Earlier in February, when the US automobile manufacturer Tesla announced that it had bought $1.5 billion worth of Bitcoin, the market showed renewed interest in cryptocurrencies. The company also plans to start accepting Bitcoin and Altcoins as payment for their products. And let’s not forget that many mega-corporations, including Microsoft, Whole Foods, PayPal, and Etsy, are already accepting various cryptocurrencies as a valid source of payment.
Related: Bitcoin price nears $36K as altcoins make 10% gains
However, what’s troubling for many investors is how prone cryptocurrencies are to massive fluctuations. In April, Bitcoin reached an all-time high of $65,000 and then dropped to around $30,000 a month later, following the Chinese government’s crackdown on digital currency trading that spiked sell-off. Currently, valued at around $36,000 per BTC, there are signs that Bitcoin is slowly regaining momentum.
Crypto During COVID-19
Despite the instability, cryptocurrency has seen impressive growth over the last few years. And in many ways, this surge can be attributed to the economic impact of COVID-19. Many governments ramped up spending and have central banks printing more money to cushion crippled economies and boost spending. These moves have investors questioning the validity of fiat currencies and whether centralized monetary policy truly benefits in the long run. As a result, many investors have bought cryptocurrencies to hedge against the inevitable inflation.
Another significant change that we’ve witnessed in the last two years is with regard to online spending habits. With most countries under strict lockdown for several months, many people have adopted online shopping habits and are becoming more comfortable with digital currencies.
On the flip side, businesses are also more accommodating, with many giving customers the option to pay with cryptocurrencies. Using online payment processors such as BitPay and CoinBase Commerce, even smaller businesses and freelancers can now accept payments in different digital currencies.
Cryptocurrency and Emerging Economies
There’s no denying that cryptocurrency offers a range of economic benefits, but some of these are particularly relevant in the context of emerging economies. Here are some of the top benefits.
• Help avoid overvalued exchange rates. Bitcoin has become one of the top ways to send home remittances. For instance, in Nigeria, many expatriates are sending home money via Buycoins Africa, which helps them circumvent what many believe to be an overvalued country exchange rate.
• Allows easy transfer of funds. Given that many places have limited infrastructure and currency exchanges, cryptocurrencies that can be bought and sold via mobile devices open up many new opportunities for the transfer of funds in remote areas.
• Hedge against economic instability. In areas where economic and political instability impacts local currency value substantially, cryptocurrency offers are a solution for countries where currency debasement is a major issue. Even if many investors in established economies feel that crypto is a speculative option, for a lot of people in emerging economies, crypto is a safer bet compared to traditional currency. According to data published by the stock charting platform,TradingView, there’s a direct correlation between interest in cryptocurrencies and the rise of political uncertainty with clear examples such as Libya, Cuba, and Myanmar.
• Increased employment opportunities. For many freelancers and online businesses, cryptocurrency has become a valuable source of income. Many people are also making money with crypto through micro earnings. Basically, if you have some free time on your hands or can do small tasks, you could earn in cryptocurrency. These are generally very small amounts for tasks such as watching videos, viewing adverts, app testing, taking surveys, getting referrals, and more.
While some emerging countries have banned or restricted the use of digital currencies for transactions, others are encouraging it. A prime example would be that of Costa Rica, where people can be legally paid in cryptocurrencies. Given that most of Costa Rica’s energy comes from renewable sources, it also doesn’t impact the environment and has led to the emergence of a top-tier blockchain and cryptocurrency ecosystem.
Related: Despite regulatory uncertainty, Indian crypto investment surges 19,900%
The Philippines and Vietnam are two other nations that have approved the various cryptocurrency exchanges and are adopting crypto at a rapid pace. While many central bankers are against the use of digital currency, there’s no denying that the appetite for crypto is huge and that it has helped propel these economies towards economic stability.
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