Can Coronavirus Trigger a New Era for Financial Services?

Initially, global stock markets did not attach much importance to COVID-19. Nonetheless, when the spread of the coronavirus sped up, it became abundantly clear that COVID-19 is no longer problem specific to China.

It doesn’t matter where you live. The impact of the pandemic is becoming more acute. Coronavirus has had an enormous negative effect on industry, tourism, trade, the stock market, and of course, the cryptocurrency space. Keeping all this in mind, let’s aim to answer a few simple questions:

• What effect will this infectious disease have on financial markets?
• Which assets will be feverish, and which will get by with a slight cold?
• Will the results generate interest in and momentum for developing the tokenization?

Crypto vs. Coronavirus

A teensy bit of backstory: When the traditional markets collapsed, the digital asset price also fell dramatically. Its value reached a ten-month low with one day’s notice in mid-March. Later, the decline in the cryptocurrency markets continued, but the price of BTC slowly began to recover.

Bitcoin is currently bleeding below $7,000, but its price is still far from this year’s high. While the short-term prognosis looks bleak, market participants are keeping their chins up. Cryptocurrency exchanges such as Kraken, Wakes, Bitfinex, Pascal, and Luna reported an increase in the number of new user registrations and trading volumes against the background of the coronavirus pandemic in late March. Suffice it to say that the “printing press” states are running to combat the effects of coronavirus have invited skepticism among venture investors. They stressed that the more cash splashes into the market, the less it will be worth.

Now is the perfect time for the public to pay attention to crypto because the first cryptocurrency has a limited supply. Thanks to the coronavirus pandemic, the current economic system will not be able to survive another crisis, giving way to a better innovative tool. Therefore, it is likely that BTC will literally become digital gold. This prediction is evidenced by Google statistics for March 16, when the number of internet searches for “buy Bitcoin” and “buy gold” were equal.

Obviously, investors have nothing left but to deal with the loss of monetary value of their assets and, consequently, their savings. One of the better ways to fight inflation has always been to invest in assets that are not vulnerable to inflationary pressure and, therefore, are not at risk.

First and foremost, we have gold and BTC. Interestingly, the price of one of the most liquid assets has recently continued to trend upward with gold. We are now witnessing how capital moves slowly from the confirmed inflation of the financial environment to a safe haven called non-inflationary assets. BTC and USD are beginning to rally with strong bullish signals, and we will soon see Bitcoin above $10,000 again.

Let’s face it: people don’t have to worry about the government printing an awful lot of money and devaluing it. They can simply choose virtual money because it is already an integral part of the economy. It is extremely easy to use, universal, transparent, and anonymous. You can make transactions like nobody’s watching because nobody is watching.

Crypto enthusiasts firmly believe that in the future, not only cryptocurrencies but states themselves will compete in the virtual space. In practice, that would result in citizens of any country around the globe having the opportunity to choose a payment method for another country and use it. Geographical boundaries will mean nothing. This decentralized super-organism will become the world’s lifesaver after the crisis settles.

Tokenization to the Rescue

The ongoing coronavirus pandemic has paralyzed the global economy. Today, more than three billion people are under quarantine or self-isolation orders. However, cryptocurrency experts believe that this crisis will lead to a greater likelihood of the promotion of tokenization.

Although the coronavirus pandemic has had an enormous impact on traditional capital markets, a progressive, secure, and transparent way to evaluate and manage any asset that represents value can benefit from this situation. If cryptocurrency is just the “money of the 21st century,” it is still money, even if it is fundamentally new. Then, other tools created with blockchain technology can become real curiosities for the economy.

We’ll spare you the major hurdles that need to be overcome before the promising economic model reaches a broader investor pool (difficulties in regulating and infrastructural limitations that have contributed to the slow implementation of the tokenization are to blame). None of that matters. What matters is that tokenization offers indisputable advantages in terms of liquidity and transparency, spelling a new era for financial instruments. Decentralized by nature, the token is even more secure as a financial derivative. Perhaps this whole situation will encourage key market participants to pay close attention to the real-deal enterprise solution and give this innovative technology a try. Financial exotics open new windows of growth potential and diversified investment. That can be seen first and foremost in successful cases applied in practice bringing real benefits to both issuers and investors.

This high-yielding alternative asset class, in contrast to traditional cash, is not tangible and cannot be transferred from hand to hand or person to person. Blockchain and distributed ledger technology enable individuals to transfer assets virtually, vastly reducing the likelihood of illness. Additionally, you can send crypto independent of location. Consequently, there is no need to go out and come in contact with anyone, which reduces the risk of airborne disease transmission. In our present circumstances, reducing this risk is critical to effectively respond to the coronavirus. Financial life will continue and even be promoted free from fear and intimidation.

Final Words

No one ever dreamed that a cousin of the SARS virus could have such serious consequences. Still, it looks like the market is now ready to translate physical assets into tokenized treasures. Lemons into lemonade, right? Most importantly, there are no fundamental obstacles to this promising option for small businesses. The only mandatory thing here is to adapt the financial sphere and legislation.