The difficulties of vaccination and the new waves of infection by the coronavirus compromise the resumption of economic activities, recreating a scenario of acute economic crisis experienced at the beginning of the pandemic.
Even countries with the highest immunization rate face restrictions on the circulation of non-immunized individuals, showing that recovery may take longer than imagined.
Such a scenario of uncertainty also increases the risk of a new sharp fall in shares and even corporate bankruptcy, which drives investors away from stock exchanges to other assets that offer better returns.
Greater earning potential
In a synchronized way, in addition to the pandemic, the rise in gold and the dollar reduced the possible remuneration of these assets. Keeping interest rates at low levels reduced the attractiveness of government bonds. Amidst this scenario, there was a halving that, by itself, leads to an appreciation of the cryptocurrency, since the issuance of assets is limited.
All of these factors together provide greater earning potential for Bitcoin investments compared to traditional assets such as gold, dollars or government bonds, increasing the attractiveness of cryptocurrencies.
Bitcoin and other crypto-actives have consolidated as important financial assets for the formation of reserves for the purpose of economic protection of companies during the health crisis, although they still need to reduce their volatility and increase their usefulness to maintain the scenario of appreciation for long term.
New players, including institutional investors, have been attracted to digital currencies. In October of last year, payment giant PayPal began allowing more than 26 million merchants worldwide to receive payments in BTC. More recently, Mastercard announced support for cryptocurrencies, including the creation of a BTC reward system.
Tech company Tesla announced the purchase of $1.5 billion in Bitcoins to build its reserves in February. To prove the currency’s liquidity, the company sold $272 million in BTC and posted a $101 million profit on its balance sheet for the first quarter of 2021.
What are the main trends in cryptocurrencies?
It is impossible to predict the behavior of Bitcoin price in the short term. However, in the long term, the currency has a tendency to continue to appreciate. This is because the main fundamentals of the crypto-active, such as limited emission, network security and growing demand, should continue to pressure its price.
The maturation of digital currencies, with advances in terms of adoption, regulation and infrastructure, is expected to bring more security and continue to attract new global individual and institutional customers to build reserves with crypto-actives.