Musings on the Impacts of COVID-19 on Blockchain
Economic downturn? Cryptocurrency boom? Blockchain applications? This is a simple overview of what could happen to our decentralized future.
There is little that has not been touched by the recent Coronavirus pandemic. As we are now in a time of rapid change and economic upheaval, this article will skim the surface of how recent changes could affect the future of blockchain technology by tackling 3 areas: cryptocurrency, blockchain as a solution, and public sentiment.
By no means are these answers to the question of how blockchain will perform in the near future, for blockchain is a complex, intricate creature. But what we‘ll do is present you with some facts and analysis for you to use in formulating your own visions.
Global economic downturn
Before the COVID-19 crisis, global markets were highly performing. The lucrative financial markets and overvalued technology sector were signs of a possible economic bubble. Pre-pandemic, the IMF predicted a 3.3% global economic expansion.
Then, COVID-19 hit. The coronavirus has devastated the global economy, spurring a dramatic increase in unemployment and likely forcing both mid-sized and small businesses to close its doors. Last week, the IMF estimated that global GDP will shrink 3% this year. These factors all make it very difficult to predict what a post-pandemic economy will look like. It is widely suggested that all economies will have a difficult time recovering due to the loss of jobs and necessary ramp up time of many industries and the educational sector.
So what does this all mean in the context of the entire blockchain market? It may be that the coronavirus is the black swan event that triggers the deleveraging and bust of this cycle. We might see a noticeable decrease in the amount of funds available to new ventures. Global startup hubs like New York and Zug have already seen many of its local blockchain companies like Cointelegraph close their offices.
Cryptocurrency, being a relatively new area in comparison to other more established financial and technological institutions, may get the short end of the stick with reduced backing from public ICOs or VC funds.
Blockchain solutions for existing use cases
But tighter constraints on money don’t signal an end for innovation.
Blockchain is a solution for many issues on the web. The internet in its current state has many flaws, its biggest being that, “it doesn’t have a built-in mechanism to capture, or transfer, historic or current conditions — ‘state’. State represents information, which enables the capture and transfer of value”(Kelnar). COVID-19 has pushed the whole world towards a more digitalized society and, with it, demand for a better way of managing information. The focus for blockchain related businesses may shift dramatically towards services.
“Security is a major concern when it comes to monetary transactions and therefore blockchain can easily provide you with end to end-user experience and trust.” — ReadWrit
Services that may come to the limelight are asset management, payment processors, or security layers, which companies are already experimenting with throughout the pandemic. We may also see an increase in blockchain solutions being used to solve issues within social systems. In China, blockchain has been applied to the healthcare and philanthropy during the COVID-19 pandemic already.
Cryptocurrency, a beacon of stability?
“A borderless and permissionless substitute to government-sanctioned fiat money, is going to be in high demand in the post-coronavirus world” — Forbes
Globally, the pandemic has greatly reduced public trust towards control of money by central authorities. Especially as governments such as that of the U.S. flood the markets with money through stimulus packets, interest towards more stable assets increase. Capital controls are also being used in this time of crisis, most recently in countries such as Greece, Cyprus, Argentina, Iceland, and Lebanon.
This is all driving the interest in blockchain. In China, the search engine Baidu has seen a rise in searches for “bitcoin” — up 183% over the past thirty days.
Other leading global search engines such as Google have seen similar trends.
Such trends have also been reflected over the last few months in a surge of crypto wallet sign ups, trading activity on large crypto exchanges such as Binance and Coinbase. The belief in blockchain as a currency has been reflecting in cryptocurrency as prices have surged, “more than 100% from its March 16 low and has eclipsed $10,000 for the first time since February” (MarketsInsider). The use of cryptocurrencies to buy goods and services has also skyrocketed.
This coupled with the push towards a digitalized society could be the drivers of positive public sentiments towards a decentralized medium of exchange and increase the usage of blockchain in daily transactions.
So what can you do?
After consuming this wide array of information, there are a couple of recommendations I have for you.
If you’re an early stage startup within the blockchain space, we recommend you shift your focus towards marketing and user education. There are many applications for blockchain technology and, after multiple booms and busts, people are increasingly seeing blockchain as a stable solution. Additionally, following COVID-19, an online presence will be of utmost importance.
If you’re an investor or someone who is just curious about the blockchain industry, stay updated with the sectors mentioned above. Also, with the economic instability and changes in the crypto world like bitcoin halving, focus on management of your portfolio as the next few months will likely be rocky.
Nonetheless, the blockchain world is something to keep an eye out for.
This article is the first overview article out of a series of articles we’ll be releasing regarding blockchain in a post-pandemic world. The following articles will dig into specific issues mentioned in this summary more closely. For more information and to stay updated, follow our medium page!
If you’re an early stage blockchain startup, get in touch to see if we can assist in your journey.
