Cryptocurrency Growth Could Be Spurred by 2020 Economic Stimulus Efforts

Cryptocurrency markets have spent the past 24 hours or so consolidating after a strong start to the week in the wake of a stock market rebound. The move was initiated by central bank stimulus efforts which started with the Bank of Japan on Monday. The term ‘fiscal stimulus’ is likely to be heard much more often this year as governments seek to contain the economic damage from the Covid-19 outbreak.

Cryptocurrency Narrative Growing

Very few countries are escaping the effects of this global economic slowdown, which had been predicted even before the virus outbreak. Central banks printing more money to encourage borrowing and spending and dropping interest rates into the negative territory are not the solutions. These means of mitigating economic damages have been tested and failed in the past, as anyone who remembers 2008 should agree. Coinbase chief executive Brian Armstrong has commented on the crypto narrative which could come in to play this year as a result of all this quantitative easing. In a recent tweet, he stated that “A down stock market and interest rate cuts may lead to growth in crypto this year.” Canny investors may also see the futility of printing money and devaluing it at the same time. This could spur a movement of part of their portfolios into safe haven digital assets such as Bitcoin or Ethereum. Armstrong elaborated further; “This could be the year where the mindset of institutional investors begins to shift, from crypto as a venture bet, to crypto as a reserve currency.”

The Opposite Could Also Occur

Of course, the complete opposite could happen if factories close down and supply lines are cut. Employees may be quarantined at home and it is unlikely they’ll all be on full pay. This means less money to spend and less money to invest in high-risk assets. At the moment cryptocurrency markets have largely been driven by retail investments while the institutions have sat on the sidelines or stuck to futures. The charts have also indicated that CME futures volume has fallen since the outbreak began indicating that institutional traders are getting cold feet. The best investments over the next six months or so could be in tins of non-perishables as panic buying already seems to be occurring in some places.