Is it worth investing in Bitcoin in 2020?
It is 2020 and just 11 years back, the world witnessed a new form of currency that is not regulated by any government and is independent of banks or any other form of intermediaries. The advent of modern technological advancements around the world has transformed the world into a digital globe and gave birth to the digital currency we now know as Bitcoin.
It all started in the aftermath of the 2008 financial crisis when Satoshi Nakamoto published a whitepaper on the first digital currency to limit the effects of a future global crisis. He then went onto mining the first Bitcoin block in January 2009, known as the Bitcoin genesis block. The decentralized nature of Bitcoin, complete transparency, and the ability to transfer it among users through a peer-to-peer Bitcoin network without any involvement of banks has made it one of the most successful digital inventions of the 21st century.
Bitcoin has reached new heights in a fairly short time since organizations and businesses in all sectors from all over the world have decided to accept money from customers in its form. Even billion-dollar businesses, such as PayPal, Microsoft, and Dell have updated their financial systems to incorporate deals using digital currencies. If put simply, Bitcoin or BTC allows you to buy or sell services or goods through the exchange of digital information on a secluded network, just like BitTorrent or Skype.
Impact of Covid-19 Pandemic on Bitcoin
The coronavirus outbreak that originated in China was labeled a pandemic by the World Health Organization in March 2020 and this is when the world got to see another crisis having the likes and magnitude of the Great Recession just after 12 years. Due to most of the countries going into temporary lockdown mode, almost every asset in the world fell in value. This is also when Bitcoin saw the greatest temporary volatility as it dropped by 45% to under $4,000, but it quickly rose to around $7,000 by April and since it has been trading at its pre-pandemic value. For now, it is considered by many economic experts to be stable for the foreseeable future.
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Just like in the wake of the 2008 financial crisis, the governments of the UK and the US have responded to the crisis by applying Quantitative Easing methods in order to fuel the economies of their states for the ongoing pandemic situation. Quantitative Easing is a tool to increase money supply into the national economy by purchasing bonds and other financial assets from the open market with a digital currency, that helps boost the economy. Although this procedure does the job in the short-term, it does have a downside. As the currency supply increases, the value of money drops which gradually leads to inflation. Now, Bitcoin with its decentralized structure, which is void of government intervention and central banks, does not get affected in the same manner, which makes it less vulnerable to a global crisis, such as this year’s coronavirus pandemic.
Is it worth investing in Bitcoin in 2020?
Since a cryptocurrency like Bitcoin is devoid of any quantitative easing measures that other regular currencies face in the time of crisis, it is relatively more unstable and unpredictable than their conventional counterparts. The lack of a central management system introduces Bitcoin to the possibility of price gouging and several other scams that regular currencies are less likely to encounter.
Economists around the world have always hailed Bitcoin as a safe haven for times like this and according to several analysts, the pandemic is supposed to be the time for Bitcoin to shine, but it has yet to show any significance over its traditional counterparts and competition. With so much doubt revolving around the response to the coronavirus pandemic, Bitcoin is likely to see further volatility in the upcoming months and therefore, moving in the same direction of regular assets.
Some reports also say that Bitcoin might go as high as $20,000, but unless the global financial numbers show any signs of recovery from the ongoing pandemic situation, investors are advised to direct their investments towards the plethora of stable company stocks that are trading low due to the virus outbreak, and are, therefore, a great opportunity for long-term investment.
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