How the Covid-19 Pandemic Affected Bitcoin and the Whole Crypto Market

Covid19 & Bitcoin

Created by TradeOr

Cryptocurrency 30 Dec 2021

Key Takeaways:

      • Covid’s impact on bitcoin has led to a surge in price as it got out of the pandemic stronger
      • The outlook for growth remains bright with more people joining the crypto space daily

      The Covid-19 Pandemic and the Rise of Trading from Home

      The Covid-19 pandemic that swept the globe in early 2020 changed how we approach the world of trading and investing. During the early phases of the coronavirus pandemic, a wave of countries rushed to close their economies, borders, and virtually all social activity.

      As people stayed in their homes, a major shift in perspective was born as to who and how can invest. What followed was people turned their attention to investing as retail traders, or non-professional market participants.

      As the pandemic arrived, leading financial assets like stocks, commodities and currencies lost a significant portion of their worth. As a result, people searched to find bargains amid a sea of red, driven by extreme market fear.

      One specific asset stood out from the crowd as it held tremendous growth potential. While the pandemic was sweeping financial markets, investors turned their attention to bitcoin. The world’s first cryptocurrency, bitcoin would turn out to be a strong contender for the best-performing financial asset of the pandemic years.

      Bitcoin has Been a Preferred Asset During the Covid-19 Years

      Throughout the pandemic months when people were largely under lockdown, bitcoin began to see increased interest. In numbers, the price of bitcoin slipped to a pandemic low of $3,900 on March 12, 2020. Since then, the flagship crypto has experienced a rollercoaster ride full of volatility, challenges, and opportunities.

      For one, bitcoin has endured strong jitters and extreme price swings. As a result, bitcoin’s valuation soared over 800% for the period March 2020 to December 2020. More specifically, the price of the orange coin finished the year slightly below $30,000 per token, a level is never seen before.

      Further, going into 2021, strong tailwinds lifted the price of bitcoin month after month. Traders buying bitcoin from the comfort of their living room were joined by Wall Street mainstays who wanted a piece of the crypto pie.

      What followed was a broad-based bitcoin adoption as institutional investors and professional money managers turned into bitcoin believers. As a result, bitcoin’s price was fueled by fresh buying momentum which would lead to a new record high for the digital asset.

      How Covid19 Helped Bitcoin Reach an All-Time High

      While economies began to gradually reopen, bitcoin maintained its upward trajectory going into 2021. Moreover, increased demand for cryptocurrency underpinned a strong rally to a new all-time high near the end of the year.

      More precisely, bitcoin reached a record high of $69,000 per coin on Nov. 10, 2021. In other words, bitcoin’s price surged 1,700% from its pandemic nadir to its all-time high. This said bitcoin is yet to make a fresh record high as recently the price has been trading mostly sideways.

      Nevertheless, the orange coin witnessed huge demand during the pandemic years as investors found in it a place to store value. Not only that, but the investment climate over bitcoin shifted to strongly positive.

      This said mainstream investors such as Wall Street banks looked for ways to adopt bitcoin and offer it to clients. In addition, many hedge funds praised the crypto token as they scrambled to get exposure to it.

      Institutional Investors Show Elevated Interest in Bitcoin

      In that context, billionaire investors, technology leaders, and big investment firms showed elevated interest to hold bitcoin. Some big names among mainstream finance who have ruled in favor of the orange coin include Ray Dalio and Larry Fink.

      Ray Dalio, the founder of the world’s biggest hedge fund, Bridgewater Associates, said he has invested in bitcoin earlier in 2021. Further, Larry Fink, the founder of the world’s largest asset manager, BlackRock, believes bitcoin could become “a great asset class.”

      Other prominent entrepreneurs who own bitcoin include Tesla CEO Elon Musk, Apple CEO Tim Cook, and even George Soros through his Soros fund.

      To this end, institutional investors are keen on owning bitcoin as they believe its future will be bright. Still, 2021 has been a big year for cryptocurrency. As a result of people’s interest in bitcoin skyrocketing, Wall Street was looking for ways to get involved in the red-hot market action.

      Greater Adoption Rolls Out as Bitcoin Debuts on Wall Street

      Perhaps one of the most significant milestones of bitcoin for 2021 is its adoption by mainstream finance. In more detail, bitcoin debuted on Wall Street and is now trading alongside stocks, currencies and commodities.

      This said, three bitcoin exchange-traded funds arrived at the US stock market during the second half of 2021. The first one, packaged by ProShares, became the second-biggest launch with almost $1 billion worth of shares traded on its first day.

      The strong push towards broader acceptance placed bitcoin at the forefront of the crypto revolution. Since then, there has been tremendous focus on digital assets as long-standing investors are eager to dive into the fast-developing market.

      In turn, increased demand for bitcoin has caught the attention of US financial regulators. As the industry is constantly evolving, the Securities and Exchange Commission has shifted its focus on providing investor protection.

      Regulations Over Bitcoin Promise to Bring More Growth

      The good news on the regulation front is that top financial watchdogs in the US have expressed enthusiasm to introduce crypto-friendly regulations. For example, Securities and Exchange Commission Chairman Gary Gensler happens to be a bitcoin and blockchain expert. In this light, he has stated multiple times regulations are needed to protect traders.

      Moreover, the US central bank, the Federal Reserve, has also presented an accommodative stance towards bitcoin. Fed Chairman Jerome Powell recently said that US central bankers have “no intention” of banning cryptocurrencies like bitcoin.

      Against this backdrop, analysts say clear regulations over bitcoin would remove significant roadblocks for the continued rise of crypto assets. Also, once guardrails are present, US investment firms will be able to quickly hop on the bitcoin bandwagon and take the price even higher.

      Bitcoin Growth Projections Shine Bright for 2022

      While detailed predictions are impossible, we can pinpoint the ones most anticipated by traders and investors. First and foremost, the crypto market outlook remains bright with bitcoin staying in the lead.

      The original cryptocurrency is likely to see further grounds covered as it expands into the mainstream financial system. To this end, strategists point to a new all-time high sometime in 2022.

      In addition, experts believe the broader institutional bitcoin adoption would be a key driver next year. With this in mind, the inflow of attention is likely to be reflected in a boost of bitcoin’s price.

      Also, regulations and clean energy sources will play a role in the future of bitcoin in 2022. Regulations, on the one hand, are to be announced soon. The environmental impact of bitcoin mining, on the other, is a challenge that will be more difficult to solve. Once done, however, bitcoin and digital currencies will enjoy an even bigger wave of adoption.