Why Was Bitcoin Crashing Inevitable?br>
The COVID-19 outbreak has forced the entire financial systems to rethink their plan of action and to adapt to a new reality. The Stock market has been battling with its worst week in years as the investors are panicking, trying to figure out the best way to at least try and make the best of the situation. The crypto markets have become way more unstable, sending multiple countries into a shocking state with the recent developments on the currency exchange market.
Since at this point the medical sector is basically holding every other sector in its grips it’s practically impossible to use all the same tools and strategies to try to get the world back to normal. This is going to be our reality for the months to come and while panic will probably die down over the following weeks, the severe effect of the pandemic will still be felt in economies across the world and the financial systems will have to continue to try and work around this topic without completely collapsing their economies but also taking care of their healthcare sector and giving the people the medical care they need.
Why no one saw it coming
While it’s not easy to predict how an outbreak like this will affect the stocks and other markets in the long term it seems like a couple of insiders was in on the most realistic outcome as a couple of senators were actually exposed, having sold the majority of their stocks just as the outbreak was starting to get the momentum. So the world, at least the very privileged, were aware that the COVID-19 would mess with the world’s finances in a major way from the very beginning and now we are all looking at the new financial reality that will definitely have a lasting presence.
While the currencies across the world are fluctuating, with national banks everywhere trying to use all their tools to stabilize the markets in the most orderly fashion they know, the world sadly is not as organized. The sheer fact that it took almost a month for COVID-19 to be declared a pandemic shows just how bad we really are at collaborating on the international level.
All that aside, a number of exchanges, as well as almost every trader, were expecting that cryptocurrencies will prove to be resilient to these crashes and simply because crypto operates in the digital sphere exclusively, which actually went largely unaffected and actually saw a huge increase in its users, would go on business as usual. This was backed up by the strong couple of weeks in the crypto community, while 2019 was actually proven to be quite a tough year for bitcoin specifically. At its best, this year bitcoin was trading at around $9000 with many industry experts hoping that in the following months the cryptocurrency might even reach the $10k. Sadly that didn’t prove to be a reality as of right now bitcoin has long plummeted below $8500 and so far the future is not looking bright.
How can it recover again?
This was a very important test for the entire blockchain community and for everyone that uses cryptic to trade, to purchase things, and to just store their assets. But for an untrained eye, this did not make any sense and the crypto world should’ve gone on as usual.
The reason why this didn’t happen takes us back to China. Since bitcoin mining is done by specialized computers, the role of miners who secure the network and to process these bitcoin transactions. As the miners solve computational problems, allowing them to chain together these transactions, the bitcoin transactions become possible and that is how trading and every other type of transaction is done on the blockchain. Now, a huge amount of miners are located in China. This means that the world is largely dependent on these miners, to be able to trade bitcoin, for the markets to keep going as usual, and to overall maintain the security and the organization of the entire cryptocurrency industry.
This is no small task to do under any circumstances but as the outbreak forced an entire country of China to go into lockdown, practically eliminating movement, making the restrictions extremely strict and forcing hundreds of thousands of people to either work from home or to leave their duties completely, this of course affected the blockchain industry as well.
There are other theories as well, some of them pointing to the biggest Ponzi scheme in the crypto history, the one that scammed a lot of people, taking away billions worth of bitcoin with them, never to be seen again. This Ponzi scheme was orchestrated by PlusToken, with many reports stating that they were using these stolen cryptocurrencies to navigate the bitcoin market to their favor, which is not that far off since they stole around $2 billion in crypto. While it does make sense that the theft of this scale would affect the market and that in these trying times a scammer like PlusToken would be the one taking advantage of the situation the most realistic explanation is probably the combination of things.
This is a confusing time for everyone and the unpredictability of the outbreak is just making things worse for most people. But it is no to say that this outbreak completely shook the bitcoin to the core because over the last week, as the panic over the virus is starting to subside as we learn more about it and how to cope with it managed to slip up again from its lowest point in the recent months, getting as low as $4000, to trading at around $8500 now.
In the future months, we will need to digitize most of our daily routine and services, and while the first hit of the virus really seems to have thrown off the entire financial scene. Maybe this will actually serve as a positive thing for the crypto industry, increasing its value and adoption as this payment method becomes more popular and necessary. Of course, the effects of the virus are going to last for a long time, but during that period cryptocurrency could actually get a completely new user base as well.