With the lockdown in Europe, Bitcoin received a massive blow but it just took a few weeks to return to its previous level.
Over the last twelve months, the star of the crypto money industry has shown extreme stability with a variation of +0.7%. Overall, the crypto money industry is doing rather well in this period of crisis. And, as an investment, crypto currencies such as Bitcoin have the potential to become a "safe haven" value just like gold.
Crisis and Cryptocurrencies
The volume of transactions on trading platforms increased by 20% during the pandemic During the lockdown, people were obviously more at home, more available, and therefore more inclined to experiment with cryptocurrency. And the effect of Bitcoin's "halving", the halving of miners' pay, certainly played a role in reducing the supply.
Beyond this episode, the crypto market could become even more important in the post-Corona era, were we are heading towards economic recession. As an investment, cryptocurrencies are becoming a "safe haven" like gold, precisely because they are not linked to the real world. They are independent of economic and business conditions. During or after a crisis such as this one, they have the advantage of being an investment uncorrelated to economic indicators. And they are also characterized by a rapid recovery capacity. Cryptocurrency could thus become a haven for investors, a role traditionally assigned to gold.
There is of course Bitcoin, which is for many a synonym for crypto. With the strongest brand awareness of all crypto currencies, more than 300,000 daily transactions and many investors worldwide, it is likely that it will continue to play a key role in the future. But beyond Bitcoin, some "altcoins" have the potential to attract consumers as an investment but also as a means of payment - and initiatives such as Facebook's Libra could accelerate this development.
Reassuring the public
On the public side, the likely number of users worldwide is about 25 million people for 50 million portfolios. There are already 6% of French people making financial investments who declare having invested in cryptocurrencies2.
Technology giants could play a role in the growth of this market by accelerating the adoption of crypto currency, and by pushing its development with a currency they support or initiate such as Facebook's LIBRA. In the immediate future, for payments, in Europe, the use of crypto money will continue to develop for large transactions, probably not for everyday purchases. But in Africa, crypto has potential as a daily payment method because many people do not have a bank account there.
Governments should also take a more consistent approach because trust is the key to this market. Governments today are struggling with the concept of cryptocurrencies. On the one hand, they have questions about its nature and means of control, and on the other hand, they would like it to develop as an innovative fintech industry. This leads to a very different approach depending on the country, from very strict to very flexible regulations. A comprehensive regulation by major national institutions of the trade and use of cryptocurrency could convince the public to start using it.
For the market to develop, trading platforms that facilitate easy and secure exchanges are also needed. While there are 114 crypto trading sites considered as illegal or dangerous on the AMF blacklist (French financial market authority), consumers have to be careful in selecting platforms that operate in accordance with their local regulation and refer to independent customers reviews.
Because in the future there will be more and more applications of crypto coins and tokens that should all be traded transparently.
The growth in the number of users of cryptocurrencies depends on many variables, but we can expect double-digit growth in the years to come, at the same time as the potential of the blockchain with its real-world applications will become reality. It seems that crypto is here to stay.