How COVID 19 Impacted Crypto Market Size and Share?

Most of the commodities have lost their value due to the COVID 19 pandemic which has also created havoc in the global economy and history of mankind.

Everything seemed to have struggled to sustain and survive the impact but, the crypto market, in comparison, seemed to be immune to the virus effects.

Well, almost. As said earlier, the crypto market has had both positive and negative effects due to the COVID 19 pandemic overall.

For example, the value of Bitcoin has boomed and reached astronomical heights during this period.

From roughly $7000 in value March 2020, it has reached up to $54000 of late, leaving the entire financial world astonished.

Crypto investors have literally doubled and even tripled their fortune during this period and the world saw some new Bitcoin millionaires and billionaires in the making.

After the COVID 19 outbreak, the world of cryptocurrencies has seen a lot of change.

Major payment systems and service providers have joined the bandwagon to help people purchase goods and services with their crypto holdings.

For example, PayPal in October 2020 announced that it will allow its customers to make trades, buy, sell, and hold crypto coins including Bitcoin via their PayPal accounts.

It also allowed their customers to buy commodities from those sellers who accept PayPal, a number exceeding 26 million!

Add to that, in 2021, PayPal also announced that they will allow crypto coins to be used as a source for funding.

However, there is no reason to believe that the COVID 19 pandemic is the primary and only reason for the growth of the crypto market.

There are also several other aspects and features spread all around the corner of this market that have made it immune to COVID 19.

It is important to look at all the available facts, figures, aspects, and analyze them properly.

All these are significant developments in and for the crypto market which is considered to be the consequence of the COVID 19 pandemic.

However, before you get into the crux of the matter, you should gain some knowledge about the crypto market first.

The Market Dynamics

The dynamics of the crypto market is important to understand. It is usually based on three specific factors.

The transparency of the Distributed Ledger Technology is the main driver of the crypto market.

This means that no transactions are made on the blockchain without the actual knowledge of the stakeholder or stakeholders.

This is especially helpful in the Asian countries where unwanted transactions and occurrence of fraud are so very common.

There may also be other issues arising due to machine error, human error, and manipulation of data during a transaction process.

This may result in a loss of a huge amount of money.

None of these can happen in DLT which minimizes dissatisfaction among the users as they usually have with traditional monetary systems.

Though the Distributed Ledger Technology is still in its developing stage, it offers significant opportunities for growth to the crypto market both at the national as well as the international levels.

Several crypto companies all over the world have signed a common code of self-regulation.

This, they think, will legitimize crypto transactions and also encourage the users all over the country to adopt crypto assets.

This is a specific type of agreement between the countries operating within a specific region and jurisdiction for complying with reliable operational practices and standards.

Finally, the concerns of the users on privacy, security, and control of the traditional financial mechanism have also helped the crypto market to perform well and gain the trust of the users.

This has got the market going and at the same time has helped it to revolutionize and transform remittance transaction processes between the peers.

Driving Factors

Now that you know about the dynamics of the crypto market, it will be easy for you to understand the driving factors that have helped the crypto market to garner a fair bit of attention from the investors all over the world even after the COVID 19 pandemic.

The main driving force of the demand for cryptocurrencies even after the pandemic is the focus of the market to mitigate regional instability and financial crisis.

Just as banks and the entire financial sector plummeted during the financial crisis in 2008 resulting in the fall of the economy and value of currency, cryptocurrencies were relatively stable.

And, it is also the case now after the COVID 19 pandemic.

There is actually no drastic effect on the value of Bitcoin and other crypto coins and it is balanced quite universally.

This makes investing in crypto a much better option, and that is what has kept it going.

Another driving factor of the crypto market after the pandemic is the rising adoption of Bitcoin.

This has not let the demand for the crypto market to subside.

The increasing visibility and supporting regulations have raised the interest of the investors which has further augmented the growth of the crypto market at large.

Maturing cash value as well as the rewards offered for transactions have also increased the value of the crypto market which is another significant reason for more and more people inclining towards digital currency.

This will keep the crypto market up and running in the following years after the pandemic.

Restraining Factors

Perhaps, one of the most significant points of concern is the chances of misuse of digital currencies by the malicious actors, hackers, money launderers, and even by the terrorists.

This has significantly affected the adoption of cryptocurrencies on a large scale.

It is the uncertainty of the regulatory status that causes some restraints in the mass adoption of cryptocurrencies.

This is the biggest challenge of the crypto market.

However, everything is not that bad for the crypto market.

In spite of the chances of being misused, the fact that several governments and financial regulatory bodies all over the world are trying to find out a common standard for cryptocurrencies has and will keep this market going.

Analyzing the Value Chain

The value chain of the crypto coins and the market will be less affected due to COVID 19 in 2022 as compared to other financial sectors.

The primary reason for it is that the crypto market is unregulated and therefore when required the market can respond according to the demand.

It can increase the supply of coins when needed by making Initial Coin Offerings or reduce the supply by a process called halving.

This will ensure that the value of the coin, and therefore the crypto market on the whole, stays reasonably high, because the value is all about the demand and supply relation.

The activities of participants in the market will also play an important role in retaining the value of a particular crypto coin or a lot of them taken together.

Analytical Segmentation

The value chain of the crypto market can be best understood on three specific types of analysis.

First, by component analysis: The global crypto market has been divided into two parts namely software and hardware.

However, in 2022 and beyond, the hardware segment will hold the largest share of the crypto market because the users will focus more on mining.

It includes Central Processing Units, Graphics Processing Units, Field Programmable Gate Arrays, and Application Specific Integrated Circuits.

Second, by type analysis: Though the crypto market is divided into Bitcoin, Ether, Litecoin and other coins, it is Bitcoin that will play an important role and will account for the maximum share of the market this year after the pandemic.

This is because it is the most highly adopted crypto coin.

Third, by end-use analysis: The crypto market is divided into trading, retail, e-commerce, P2P payment and remittance. However, it is crypto trading that will take center stage in 2022 after COVID 19 pandemic.

Impact of COVID 19 Pandemic on Global Market

The overall impact of COVID 19 on the global crypto market has been quite notable.

As for the positive impacts of the COVID 19 pandemic on the crypto market which is known to be extremely volatile, people were still buying crypto coins not only because the market is the most appealing but they also considered these coins to be a positive hedge against inflation.

The primary reasons behind it were:

The prices of Bitcoin dropped down significantly in March 2020, almost half of its original value, to as low as $ 3,780. It is after this time that Bitcoin gained immense popularity among the public who gained so much wealth in the pandemic.
The sentiments of the market were also found to be extremely bullish. This pumped up the value of Bitcoin and other Altcoins which even broke several past and existing records. In fact, the market cap of Bitcoin was a staggering $1.1 trillion which was more than half of the entire crypto market valued at a little over $2 trillion.
The crypto coins proved to be a reliable asset during these tough times when all other commodities seemed to lose their worth. The crypto exchanges did well and expanded their business and trading figures in spite of the deadly outbreak. This has paved the way for opening several new Bitcoin exchanges, especially in the Asian countries.

In short, crypto coins, especially Bitcoin, proved to be a safer and more secure means of exchange during the worst case scenarios such as the COVID 19 pandemic.

This had attracted several new investors to try their luck in the crypto space.

However, just as every coin has two faces, and so does the crypto market.

The COVID 19 pandemic also has had some negative effects on the crypto market though the value of Bitcoin and the market on the whole had swelled up.

Though not extremely major, the few other aspects of the crypto scene that were affected by the COVID 19 pandemic are:

It resulted in a sudden spike in the price of Bitcoin and other Altcoins, which the crypto market experts and analysts believe will be short-lived. This is because crypto coins are not considered to be as safe as gold and silver, at least as of now, though the equities have been greater than before after the outbreak.
The sentiments are supposed to go on the negative note because the crypto market is unregulated and uncertain in most of the countries as of now. This is considered to be a significant threat that looms over the head of the crypto market. The outbreaks have also turned the moods of some investors against crypto.
Bitcoin may be mainstream but it is yet to be accepted and adopted by the masses as the norm for making payments in several countries.

Therefore, considering all these as well as the fact that the crypto market is still in its nascent stage, nothing can be written on the rock simply based on the considerations of the general public and the value of Bitcoin swelling up during the COVID 19 pandemic.

Chances of scams, hacks, and liquidity issues still exist and therefore it can lose value anytime.

The only positive side of crypto that has come to the fore during the COVID 19 pandemic is that it has proved to be a reliable investment opportunity.

The crypto market however can only be a safe haven for all investors, large or small, only if it is legalized in all countries.

In that case, it can really reach astronomical heights.

However, if all the rules and regulations go against its favor, it will severely affect the crypto world. The result is still awaited.

Regional Insights

The crypto market, geographically, is spread across five major regions of the world such as:

North America
Europe
Latin America
Middle East and Africa and
Asia Pacific.

Out of all these, North America seems to be most dominating because Bitcoin mining is quite popular there and it is also the home of some of the major players who dominate the market themselves.

The Asia Pacific region is also creating a huge impression in this field with its significant technological developments and their implementation in digital transactions.

Strategic partnerships and collaborations with the key players have also helped this region to boom, especially after the COVID 19 pandemic.

Japan, in particular, has acknowledged a new digital currency exchange during the outbreak of the COVID 19 pandemic.

In the same way, the Malaysian Securities Commission has also accepted such digital exchanges and has authorized them to operate in their country in spite of national lockdown due to the coronavirus outbreak.

All these point out that there is a huge opportunity for the crypto market to grow in a few specific economies due to and after the COVID 19 pandemic.

There is no surprise that several European countries and those in the Middle East and Africa are now opening doors to cryptocurrencies.

These countries are expected to witness significant growth in the crypto market during this decade.

Dubai and the UAE are already at the forefront in the Middle East when it comes to the development and implementation of blockchain in several industries.

This has helped industries in several fields such as:

Payments
Finance management
Supply chain
Trading
Monitoring
Operations and
Compliance

In fact, The Saudi Arabian Monetary Authority or SAMA and the central bank of the UAE have formed collaboration and agreed on creating digital currency that can be used by both commercial banks and institutions to settle payments quickly and in a more secure manner.

Major Market Players

Some of the major players of the crypto market all over the world who have stayed on or joined during the pandemic by getting attracted to the huge potential and possibilities of it are:

Bitmain
NVIDIA
Xilinx
Intel
Advanced Micro Devices
Ripple Labs
Ethereum Foundation
Bitfury Group
Coinbase
BitGo
Binance Holdings
Canaan Creative
Bitstamp
Ifinex
Ledger SAS
Xapo and
Alcheminer

These are the names of some of the most dominating players of the crypto market.

Though most of them are from the US, there are also some from France, Netherlands, Hong Kong and others.

There are lots of other companies who have joined and have done well during this period.

Also, as of now, the chief end-use industries of the crypto market are banking and retail but, with its current rate of growth, soon there will be others that will join in and impact the overall growth of the crypto market.

The Report Coverage Scope and Segmentation

The report of different surveys and studies conducted on the growth of the crypto market as well as the effect of COVID 19 on it covers the entire world and is done on geographic analysis.

It does not only cover the US, North America, and Canada but also includes:

Mexico
Germany
East Europe
Rest of Europe
Asia Pacific
China
South Korea and
Japan

It also covers the rest of the APAC, Europe, and the world and divides the crypto market into different segments based on the types, applications, revenue, geography, and end-user industry.

When the market is divided by its type, it includes:

Bitcoin
Bitcoin Cash
Ethereum
Dash
Ripple
Litecoin and others.

And, it divides the entire market into two types based on the offering namely hardware and software.

As for the segmentation based on its processes, it is divided into mining and transaction.

Recent Trends and Industry Developments

Finally, take a look at the recent trends followed in the market and the industry developments that have taken place during or after the COVID 19 attack.

New technologies have been developed in a specific sequence during the pandemic and partnerships have been signed to expand the crypto market and make it more functional and safer.

Whether it is in the NVIDIA GPUs, the different CPUs or the servers worldwide, developments were made in a hyper-scale all through this period.

This has not only increased the efficiency of the mechanisms involved but has also lowered the cost of offering deep learning services dramatically. All these have helped the end users significantly.

There are few other interesting facts that are revealed through the innumerable tests and analysis conducted during this period as well.

First, it is seen that there is a positive correlation between the market capitalization of the crypto coins and the number of new COVID 19 cases along with the deaths caused by the virus.

This has helped the crypto market to move upward.

Second, it is seen that during this period the curve of the crypto coins and the spread of the coronavirus had an inverse U shape which pointed towards a significant fact.

It indicated that there was a significant increase in the investments in crypto assets when there were more coronavirus cases.

Over time, when the world found a way to combat the virus, it reversed, though temporarily, as of now, the crypto experts think.

Just about a couple of years into the COVID 19 pandemic, the crypto market seems to be booming once again with some particular coins, such as Bitcoin, having a staggering rise of more than 640%, while others recording either similar or even greater increases than that!

However, the rise in the crypto market is not only due to the corona virus attack.

The other factors that were there also played a significant role in its growth but the COVID 19 pandemic simply aggravated the growth rate.

One of the most significant factors is the fact that crypto coins can be traded from anywhere and at any time.

Therefore, its operation and use was not hampered even if people worked from their homes during lockdown.

This alleviated the potential constraints of liquidity as well.

As a result, crypto coins became more attractive to invest in than other traditional investment options.

Another reason crypto became so attractive to the people during the pandemic is the fact that the crypto market is not controlled by the government or any other regulating body.

This means that they did not have to be afraid of the government, political actors, and the central banks interfering with it and reducing the returns.

This allured more and more people during the COVID 19 pandemic to shift their focus on and invest in the decentralized crypto market in order to hedge the political risks.

However, there are also some diverse effects of such a crisis that may push down the demand for crypto coins.

Though there is no correlation with the crypto market and traditional financial market during normal times, there can be during crisis situations and therefore the benefits offered by this market to the people switching to crypto assets may be negligible.

Moreover, the chaos caused in the market due to the pandemic situations may also have two dangerous effects, which may result in significant losses, such as:

First, there may be a lot of pump-and-dump schemes in practice by sophisticated crypto investors to drive up the demand of crypto coins artificially by manipulating the prices of them. This will attract unsophisticated investors towards the crypto market which will help them to reduce their holdings but get a higher price for it than usual.
Second, just as it was before the pandemic, increased attractiveness may facilitate criminal activities which malicious actors use to make the best out of the chaotic situation. Therefore, common people will abstain from trading and investing in crypto anticipating exposure to criminal charges for money laundering.

Therefore, it can be said that, as people and the world find a way to cope up with the COVID 19 pandemic, they will take this obvious route less to respond to panic and uncertainties as they did in the early days of the pandemic which is between January 2020 and mid-March 2020.

This reversal is inevitable as people will not move out of traditional markets as easily as they did before because they will be better off having a clear understanding of the dimensions of the pandemic.

There will be a natural change in their behavior. They will be more rational while choosing a risk-hedge.

Therefore, in summary, it can be said that the situation is quite complex.

No one can say for sure that the money pulled by the users from the stock market was and will be recovered in the crypto market.

Everything happening in the crypto market now is time-sensitive and what may seem to be helpful now can prove to be pointless, if not harmful, at a later point in time.

Conclusion

As of now, the crypto market has flourished in spite of the uncertainties during the COVID 19 pandemic. However, whether the same effect will be seen in the long run is unsure and it is only time that can tell whether things get resolved.

Dominic Mondal

I have special interest in crypto and intend to help common people to gain knowledge about the digital asset as well as its potential. Follow Me at Linkedin.