The Coronavirus pandemic has turned upside down the status of many sectors of the industry while many businesses are struggling to survive.
The biggest banks in the world have seen their stock value plunged during the Coronavirus crisis. Warren Buffett, known for always betting big on bank stocks has bailed out this year. There is an increasing trend of Investors investing in gold. Still, the Oracle of Omaha is not picking Bitcoin.
Meanwhile, the banks are not performing well in a post-pandemic world, bitcoin and cryptocurrencies are expected to take a bost from the coronavirus crisis according to Taimur Baig, Managing Director at DBS Bank.
“Pre-pandemic demand was largely speculative,” Taimur Baig told Coindesk. “People saw bitcoin had a spectacular run and wanted to be part of that game, so what’s wrong with putting in 1% of assets under management into bitcoin. But I think post-pandemic is beyond speculative. It’s more about, ‘This thing has fixed circulation, it will not be debased.’ People are worried about dollar outflow and wondering if they should hold crypto in addition to gold as a safe-haven currency.”
Many big investors (like the billionaire Paul Tudor Jones for example who allocate 1%-2% of his portfolio into bitcoin in May this year) see in the 21 million fixed supply of bitcoin a hedge against the inflation created by fiat currencies, especially with the stimulus measures during and post this pandemic crisis.
Last month, in a report Taimur Baig wrote for the DBS bank, he wrote that “2020 is shaping the path in the history of digital finance” and that cryptocurrencies are here to stay.
“There is no point of no return for public and private digital currencies,… Both remain brave new frontiers, with new use cases, technological developments, and challenges appearing regularly.” Wrote Braig in the report
The bank stocks have failed to bounce back after the March crash as a result of the coronavirus pandemic and in part, this might be due to the massive stimulus measures implemented by the central banks. Measures that include lowering interest rates and massive new liquidity injections through quantitative easing. Russ Mould, investment director at brokerage AJ Bell, said:
“Low base rates drag down the interest rates that banks can charge on loans and quantitative easing is designed to flatten out borrowing costs too, with the result that credit spreads—the premium in interest rate that a company has to pay relative to a government—are also relatively low, central bank policies may be, unwittingly, doing more harm than good when it comes to the major lenders,” and “seriously undermining banks’ profitability and their ability to earn decent returns on equity.”
Bank stocks have plunged massively this year, the KBW Nasdaq Bank Index has dropped by 33% in 2020.
“Only U.S. banking stocks have shown any real signs of life in the past few years, but the pandemic, a recession and reversal of Fed policy from tightening to easing (and running policy loose until at least 2023) has taken care of that in 2020,” Mould said.
All these lockdowns, cash printing and stimulus measures have driven many people toward bitcoin and cryptocurrencies. Crypto exchanges have seen massive trading volume increase and increase of newcomers over late months.
As many analysts think that coronavirus will boost bitcoin and cryptocurrencies. Tom Emmer, U.S. Senator said in August that he expects bitcoin to “get stronger” as the world leaves behind COVID Crisis.
“As we come out of the crisis, bitcoin isn’t going away,” Emmer (R-MN) told bitcoin and crypto investor Anthony Pompliano, speaking during an interview on Pompliano’s popular podcast, adding bitcoin and cryptocurrencies are going to “continue to become more and more important,” and that is of course because if its decentralized nature.