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In March, market disruption caused by the pandemic followed a drop in the price of cryptocurrencies – including Bitcoin, which lost half of its value in a day, according to a Coinbase report.
Despite this, Tether CTO Paolo Ardoino saw an increase in investment in its digital asset from retail traders.
“Usage of cryptocurrencies appears to have increased in multiple ways: retail/private customers seem to be looking into crypto to hedge their personal and family wealth against various risks,” he says. “We surmise that they may want to have a portion of their wealth under their direct control by holding their private keys, provable on blockchains.”
Coinbase reported an increase in interest in cryptocurrencies during the crash.
“When we talk about adoption, we believe it's important to focus on retail, as crypto was born to bring a resilient and provable new money for the masses,” says Ardoino.
Professionals, on the other hand, will invest in cryptocurrency to expand their investment portfolio, says Ardoino.
“Professionals/funds may be looking to crypto to hedge their portfolios against global economic uncertainty and are experimenting with digital assets with a belief that their long-term outlook is uncorrelated with traditional markets.”
A survey conducted by Fidelity Investments between November 2019 and March 2020 revealed that 36 percent of institutional investors in the US and Europe today own digital assets.
Fidelity’s study revealed that six out of 10 respondents believe digital assets should be included in their investment portfolio.
Cryptocurrency was also found to be considered a safe haven for investors during the crisis, according to a June JPMorgan report, seen by bobsguide.
The study said cryptocurrency passed “its first stress test” amid economic turmoil in March, yet it “cured much faster than other asset classes.”
“Even in the peak of the March market panic, valuations did not diverge much from intrinsic, there was little sign of a flight to liquidity within the asset class, and market structure was more resilient than FX, equities, treasuries, and gold,” added the JP Morgan report.
Ardoino also predicts an increasing interest from governments in crypto.
“We wonder if governments, more than banks, will try to launch their own digital national currencies. But their goals will be, in any case, considerably different from that of the cryptocurrency ecosystem,” he says.
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