The COVID-19 pandemic now has its grip firmly on the world. According to official numbers, almost 2.6 million individuals have been infected globally, and almost 180,000 have died. In addition to the impact on public health and the healthcare system, the global economy is starting to ground to a halt as a result of state-enforced measures to contain the spread of the virus. The International Monetary Fund estimates that the recession in 2020 is going to be bigger than in 2009.
The novel coronavirus affects everyone in some form or another. The crypto industry is no exception. Once relative normality will return, there will be winners and losers coming out of the crisis.
Who might be the potential winners and losers in the crypto market?
For many Bitcoiners it is hard to envision for Bitcoin (BTC) not to come out stronger than ever before. While the world’s leading digital currency may not have acted as the safe haven against a stock market collapse some pundits have touted it to be, it is still believed to be a safe haven against an economic meltdown.
Moreover, the Bitcoin halving is only weeks away, and the price of bitcoin has historically always rallied in the 12-18 months following a halving. It doesn’t mean it is going to be the case this time also. In either case, those who are bullish and still have capital to deploy into digital assets are most likely going to place it into BTC as opposed to altcoins.
Companies that are primarily dealing in bitcoin – especially the buying and selling of bitcoin – might come out as winners also.
The recent drop in the price of bitcoin and the subsequent recovery has generated a spike in trading volumes as the bulls and bears are fighting it out on where BTC will go next. While that does not mean that all exchanges will come out unscathed from the crisis, those who have positioned themselves as go-to fiat-to-bitcoin gateways in their region might do well.
Blockchain startups that have recently raised capital or have held onto cash from their last raise should be able to come out as winners from the crisis. Many companies are going into survival mode now, and having cash on hand will make that a whole lot easier.
If anything, the companies that survive the crisis and have cash to deploy will come out even strong after the crisis. They will be able to buy up competitors, increase their sales and marketing efforts, and gain a large slice of the pie.
The crypto market has suffered in line with stocks and other risky assets since it became clear that the novel coronavirus will affect the entire world. While bitcoin and a handful of leading assets have been able to recover some of the losses, the recent market crash does not bode well for smaller projects that largely rely on selling their token to fund their development.
During the bull market in 2017, the prices of even the smallest and most obscure coins skyrocketed, and projects had ample capital to deploy for development and marketing purposes. With many altcoins trading 70%-90% below their January 2018 all-time highs, the picture is very different today.
While bitcoin is at least estimated by many investors to rally post the halving, the same cannot be said for small and mid-cap digital assets that have left crypto investors licking their wounds in the last two years. Many small projects will struggle to survive the crisis as their tokens have dropped in value again, leaving them with less capital to deploy.
Moreover, investors are going to move their funds towards “safer bets” and will be less prone to putting their money into obscure altcoins.
Similar to small altcoin projects, crypto startups that have been struggling will suffer during the crisis. A handful of crypto and blockchain companies have already folded since the start of the year. As a result of the COIVD-19 crisis, more will follow.
Effectively any company that is running out of cash or struggling to generate revenue faces the risk of having the shut its doors. Working remotely is standard for a large percentage of crypto companies, so operations are not necessarily affected. Closing deals to generate revenues, however, has become harder now as “everyone” is holding on to cash to survive the crisis.
Small exchanges and trading platforms will likely be among the first to be affected if they are not generating enough revenue in trading fees to cover their expenses. Startups selling blockchain enterprise solutions might also feel the pinch.
Inexperienced retail traders
Anyone who is trying to time the market now or day-trade the current volatility is in for a ride. Inexperienced retail traders who are punting on crypto with leverage are poised to come out as losers.
As enticing as the current volatility may be to make a quick buck buying low and selling high, that is much easier said than done. Especially if you are using margin.
For experienced traders who put adequate risk management measures into place, the current market environment provides a lot of opportunities. But for beginners who have never traded a market as volatile as this, it will likely end badly.
Survive to thrive
For most companies, the key now is to survive the current crisis and come out as unscathed as possible. The same can be said for individuals.
Those who are able to weather the crisis without going bankrupt or funding themselves in a substantial amount of debt should be in a good position once the world has returned to relative normality. Until then, most of us will be in survival mode.