The containment put in place to deal with the Covid-19 epidemic and the economic consequences of the crisis have worked in crypto-currencies' favor. After the stock market plunge in mid-March, Bitcoin regained ground, passing the $9,000 mark in May. It has gained 25% since the beginning of the year, outperforming the S&P 500 index.
More and more individuals are investing in Bitcoin
The coronavirus pandemic has led to an unprecedented economic crisis. Its impact on corporate earnings is expected to be disastrous. While stock markets are losing their appeal due to companies' poor ability to grow sales, the same cannot be said for crypto-currencies. In April 2020, Bitcoin performed well, gaining over 40%.
Major global crypto-currency exchange platforms such as Binance and Coinbase reported very high trading volumes in April. In a tweet on April 29, Binance's CEO announced that $11 billion had been traded in the last 24 hours, the highest amount since January 2018. The platform recorded a sharp rise in account opening requests, including in France.
This attraction to crypto-currencies is mainly due to their low correlation with more traditional investments such as commodities and equities. Bitcoin is created in a decentralized way by computers using complex algorithms. Its value depends solely on the level of supply and demand. What's more, unlike conventional currencies, Bitcoin is limited to 21 million units.
Medium-term price increases to be confirmed
Interest in Bitcoin has also been boosted by the " halving " phenomenon that took place on May 11, a system created to reward miners who have validated a "block" of data. The reward for mining a block is set at 6.25 Bitcoins for the next 4 years. According to several theories, the first two halvings (2012 and 2016) led to a medium-term rise in prices. It remains to be seen whether the recent rise will be confirmed in the coming months. One thing is certain: if prices do not rise again, miners will see their income in traditional currency halved, and their less profitable facilities could disappear.
The crypto-currency market remains uncertain for the time being. The security of trading platforms and the lack of a regulatory framework represent the main disincentives to investment, particularly for retail investors, several of whom have lost all their savings following a cyberattack.