“…previously, many economists believed that cryptocurrencies would act as shelter assets at times when other currencies and securities were plummeting in value.”
In the midst of the COVID-19 pandemic and its terrible economic effects, cryptocurrencies are seeing increased adoption, even though the values of the cryptocurrencies themselves have plummeted, writes ZenGo in a new blog post.
Itself the provider of an eponymous cryptocurrency wallet, ZenGo frames the trend as a kind of paradox: previously, many economists believed that cryptocurrencies would act as shelter assets at times when other currencies and securities were plummeting in value. Yes cryptocurrency wallet providers and exchanges have been reporting higher volumes during the pandemic, despite the fact that the cryptocurrencies themselves have been losing value alongside fiat currencies.
ZenGo’s Dan Carmel speculates that a major part of the reason for cryptocurrency adoption at this time is the prospect of quantitative easing, a process in which a central bank essential prints new money to add into an economy. This, Carmel says, will drive inflation; cryptocurrencies, meanwhile, are designed to be free of any such tampering, since they “are not controlled by any centralized authority like a central bank and have a limited hard cap and predictable daily output.”
Other factors that may be driving consumers to adopt cryptocurrencies may include concerns about capital controls such as limited ATM withdrawals, and the introduction of negative interest rates, Carmel says.
Meanwhile, the growing adoption of platforms like ZenGo will mean that authentication security is more important than ever. For its part, ZenGo uses sophisticated 3D facial recognition from FaceTec to let end users authenticate with a selfie. Last summer ZenGo offered a Bitcoin reward to anyone who could hack into its platform, ultimately with no payouts; and FaceTec has an ongoing bug bounty amounting to $75,000 for those who can hack its system – so far with no reports of any success on the part of hackers. That suggests that despite the dangers of COVID-19, ZenGo users’ cryptocurrencies, at least, are in safe hands.