The cryptocurrency tsunami and the three waves of the coronavirus

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The cryptocurrency market has experienced a true tsunami since the covid-19 pandemic began more than a year ago. This is mainly reflected in the unprecedented increase in:

How have covid-19 and its waves affected the cryptocurrency market?

Covid-19 has had a great impact on the value of cryptocurrencies. At the outbreak of the pandemic, the total market capitalization value fell to half its value, reaching a low of $ 142,633 million in mid-March 2020, although it fully recovered during the first wave of the pandemic.

Starting from the second wave, the cryptocurrency market quickly appreciated, surpassing the $ 700 billion barrier at the end of December 2020.

During the third wave, the growth of the total capitalization value of the cryptocurrency market has been even more accelerated. At the beginning of January 2021 it surpassed its all-time high of $ 786,839 million (January 2018): on January 7 it reached $ 1 billion and on April 16 it reached a new high of $ 2.26 trillion.

Not in the best dreams of the most optimistic investors would it have been expected that from the beginning of 2020 to April 2021, the capitalization value of the cryptocurrency market would go from less than 200 billion dollars to more than 2.2 trillion dollars. .

This incredible rise can only be due to investors’ confidence in cryptocurrencies as a safe haven in times of pandemic, despite the initial decline in this market. Some works published in specialized magazines confirm the positive relationship between the yields of cryptocurrencies and the price of gold, which could justify that some virtual currencies are considered safe haven as gold has been throughout recent history.

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Even so, it is possible to think that this market is suffering a big bubble that at some point will deflate. But for now, it is growing faster than any other market.

What has happened in this time with bitcoin?

It was expected that during the pandemic the value of cryptocurrencies in general and bitcoin in particular would increase, since they are considered a safe investment value. But no one would have imagined that the price of bitcoin would skyrocket from $ 8,000 it was worth before the health emergency to more than $ 60,000 today.

The official declaration of a pandemic by the WHO, on March 11, 2020, caused the price of bitcoin to fall in a single day from $ 8,000 to $ 4,826. This initial drop made many investors think that bitcoin was not a safe and stable security to invest in in turbulent times, but its price recovered quickly and even grew moderately during the first wave of the pandemic to exceed the 10,000 barrier. dollars at the end of July 2020.

In the second wave of covid-19, its price rose rapidly and at the end of November 2020 it exceeded the historical maximum of 19,345.5 dollars, which it had marked on December 16, 2017.

After Christmas, the third wave arrived and the price of bitcoin already grew explosively. Just one year after the WHO’s declaration of a pandemic, it has surpassed the unimaginable barrier of $ 60,000.

This impressive increase in price is another indication of the bubble in the cryptocurrency market, (although this is a topic that has been talked about since 2017).

In addition, the market capitalization value of Bitcoin has followed the same evolution as the cryptocurrency market, since it has grown moderately, accelerated and explosively during the three waves of the SARS-CoV-2, passed from a value close to the $ 150 billion before COVID-19 to its all-time high of $ 1.2 trillion in mid-April 2021.

How has the number of cryptocurrencies in circulation changed?

Before the pandemic broke out, there were about 5,000 cryptocurrencies in circulation. Just over a year later, there are about 9,500 cryptocurrencies.

Interest in cryptocurrencies has led to the emergence of more than 4,000 new cryptocurrencies this past year. Thus, investors have more possibilities to diversify their portfolios in these assets, while diversifying the risk of investing in cryptocurrencies.

The appearance of new cryptocurrencies has caused that during the first quarter of 2020 the dominance of bitcoin has fallen from 68% to 51%.

How have the rest of cryptocurrencies evolved?

Among the rest of the cryptocurrencies in circulation, ether stands out, which, although it was already the second most relevant cryptocurrency before the pandemic, after the covid-19 it has been strongly reaffirmed in that second position behind bitcoin.

Specifically, before and during the first months of the first wave of COVID-19, Ether had a market capitalization value close to $ 20 billion and its share of the cryptocurrency market was 8%. It currently exceeds $ 300 billion and its market presence is 14%. Additionally, the price of ether before the pandemic was $ 230 and is currently over $ 2,500. These data also make Ether a very attractive cryptocurrency for investors:

Its price is much more affordable than bitcoin.

Its market capitalization value is very high (so it provides security)

It has a relevant role in the market.

The other cryptocurrencies

After ether, the cryptocurrencies binance coin, ripple and tether fight for a place of honor in the cryptocurrency market:

Binance coin has managed to rank third with a market capitalization value of $ 90 billion and 4.2% of the market.

Ripple has ranked fourth, with a capitalization of $ 60 billion and a share of 3.1%.

Tether is in fifth place, with a market capitalization of $ 50 billion and a dominance of 2.5%.

At the end of August 2020, Polkadot was launched, which has managed to position itself as the sixth cryptocurrency, with a market capitalization value of 34 billion dollars and a presence of 2%.

It is interesting that the bottom of this ranking of the ten cryptocurrencies with the highest market capitalization value are highly contested while bitcoin and ether enjoy their privileged position of market dominance, far from the rest.

Will the bubble burst soon in this market? Will it also affect bitcoin and ether? In a few months we will conduct another study to answer this question.

This article was originally published on The Conversation. Read the original.

The signatories are not salaried, or consultants, nor do they own shares, nor do they receive financing from any company or organization that can obtain benefit from this article, and they have declared that they lack relevant links beyond the academic position mentioned above.

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