As we see in the headlines every day, the COVID-19 pandemic is having far-reaching economic and financial repercussions in the United States and beyond. It has been affecting stock prices and the value of the Greenback through a variety of mechanisms, including interest rate changes and impacts on investor sentiment.
The pandemic has also been having profound financial implications on individual households – and it’s also changed how we view our money and how we invest it, according to a number of recent surveys.
You might well think that due to the pandemic creating global economic instability and turmoil, most people are now favoring safer investments. This is true to some extent, but COVID-19 has also had the complete opposite effect on many of us, with more Americans than ever now investing in cryptocurrencies, such as Bitcoin.
Specifically, a survey by Mode – a Bitcoin banking app – found that Baby Boomers have increased their crypto investments by almost ten-fold since the pandemic escalated in March.
“We believe these to be very interesting findings, and although the reasons for this could be manifold, they could potentially reveal an unprecedented change in the way investors think today, as a result of the global pandemic,” Janis Legler, Mode Banking’s chief product officer, said.
Mr. Legler went on to describe Boomers’ increased interest in cryptocurrency investing, particularly in Bitcoin, to be “extremely promising for the growth of the industry.”
The surge in the number of Baby Boomers who are investing in cryptocurrencies since the pandemic began is down to a multitude of factors, all of which are linked to the instability COVID-19 has brought about in one way or another.
Firstly, it’s important to recognize that following the escalation of the pandemic, governments, and central banks all around the world became fearful of economic growth slowing down and a potential recession being on the horizon.
So, many central banks opted to slash their interest rates in a bid to encourage spending and investing, and also discourage saving, all in the hopes of keeping money flowing through the economy in a bid to prop up gross domestic product and reduce the risk of job losses.
As we now know, this did little to stop coronavirus-induced job losses and recessions across the world, but it nevertheless made saving very unattractive, with interest rates near an all-time low.
This, in turn, has pushed people who were previously happy to just leave their money in the bank to look for investment opportunities to get a decent return. Many ended up investing in cryptocurrencies, such as Bitcoin, Ripple, and other lesser-known digital assets.
Now, you may be wondering why households didn’t decide to invest in stocks or other more traditional currencies, like the Greenback, instead of going all-in on the crypto market.
Again, this can be explained by the COVID-19 pandemic. Another product of the pandemic has been very volatile equity markets, with many indexes gaining and quickly losing value, often with no discernable medium to long term trend.
This makes investing in stocks more difficult, especially for people with little to no experience picking robust, promising and undervalued companies to invest in.
On the other hand, when it comes to crypto investing, many people simply purchase Bitcoin as a long term investment and plan on holding onto it until they can sell it for a multiple of the price they bought it at.
This kind of investing requires no previous experience and no technical analysis whatsoever, though there are some crypto day traders who analyze the market on a daily basis to search for opportunities to make money in a matter of hours. But, the vast majority of Boomers who invest in crypto aren’t trading the market in this fashion.
Lastly, the pandemic has also decreased some people’s trust of the government and financial institutions, so Bitcoin’s decentralized nature is very appealing to them.
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