INVESTORS TURN TO CRYPTOCURRENCIES AMID CORONAVIRUS UNCERTAINTIES
INVESTOR INTEREST in cryptocurrency markets in Turkey increased despite the coronavirus outbreak. Ozgur Guneri, the CEO of Turkey’s first cryptocurrency exchange, BtcTurk, said the number of new accounts on the exchange is two times higher in 2020 compared to last year. In a livestream of BtcTurk’s Digital Halving Summit, Guneri said it’s not only Turkey; overall there has been a surge in new investors in cryptocurrency exchanges and these investors are providing fresh money to the market. The low interest rates from central banks to combat the impact of the virus have driven investors to cryptocurrencies.
The popularity of Bitcoin has accelerated since its invention in 2008, with the number of new cryptocurrency investors jumping in 2017. Today’s outlook is very similar to three years ago, Guneri said. The number of cryptocurrency users on the world’s largest market, Coinbase, reached one million in July 2017 after the price of Bitcoin saw its record high of $20,000. By January 2018, the number of users had jumped to 11.1 million, according to Statista.
“New investors on BtcTurk are not interested in trading. They are inclined to invest in cryptocurrencies as a safe haven and I believe this will provide good support to the market once a down trend begins,” Guneri said.
SPECULATIVE CRYPTO TRADING EXPECTED TO INCREASE
Cryptocurrencies, namely Bitcoin, are on the path to becoming a digital safe haven after financial markets took a beating due to the coronavirus outbreak. After the first slowdown on March 12, people tried to find ways to recover with minimum damage and abruptly began selling their funds. With authorities warning that the worst is yet to come, cryptocurrencies proved themselves to be sustainable safe haven tools despite their high volatility.
The slow recovery after March 12 and the Bitcoin halving event on March 11 caused an optimistic trend in the price of Bitcoin but the cryptocurrency market is an ultra-liberal, irregular market without regulations and that’s why the market frequently experiences high volatility. “The outbreak increased this volatility, so I believe speculative trading on the cryptocurrency market will increase,” said Ismail Hakki Polat, lecturer at Kadir Has University.
In a phone call, Polat explained that the coronavirus outbreak is re-defining Bitcoin’s status as a safe haven and U.S. billionaires like Paul Tudor Jones have begun to include Bitcoin in their portfolio due to the outlook on government bills and the Federal Reserve’s rate cuts. That’s why Polat believes Bitcoin will be included in personal and business portfolios more often, since it has proven itself to be a safe investment tool in the long run since 2017.
Also, the seemingly never-ending trade war between the U.S. and China is now taking a new turn with the conflict over the World Health organization. China’s own digital currency developments and blockchain-based digital business solutions through Huawei and Alibaba will increase cryptocurrency popularity. “This new popularity may prompt governments to regulate these central bank digital currencies but this intervention may in turn steer people to Bitcoin and other cryptocurrencies, to a more liberal market because regulations and restrictions haven’t stopped Bitcoin yet.”
Cryptocurrencies like Bitcoin can also act as a store of value, a safe haven against the hyperinflation in developing countries. Cryptocurrency investments in Argentina and Venezuela, where hyperinflation is a significant source of instability, have increased in the past few years. People may choose Bitcoin over the dollar as an alternative since they can’t access it through the existing banking system against hyperinflation, according to Polat.
A STRONG DIGITAL INVESTMENT TOOL
As a result of the coronavirus outbreak, individual investors and companies are trying to position themselves in this new outlook. Compared to the 1990 crisis, the world is only at the beginning and new strategies are more important than ever. Since its birth in 2008 after the infamous mortgage crisis, Bitcoin gained attention as a decentralized asset class with a specific supply and a determined monetary policy. After more than 10 years, cryptocurrencies are now on the way to becoming longterm digital investment instruments.
The cryptocurrency market was the first to recover from the March 12 disaster, as the price of Bitcoin gradually rose above $6,000 by the end of March after decreasing to $5,174 on March 13. With last week’s halving, Bitcoin became the asset class with the lowest supply, with annual inflation of 1.48 percent, and now hovers just below $10,000.
Cryptocurrencies are widely popular in Turkey as well. Paris-based statistics company Ipsos’ survey in 2018 showed that 18 percent of Turkish people hold cryptocurrencies and 53 percent of Turks believe cryptocurrencies will be the preferred method of payment for online transactions in the future.