The COVID-19 crisis continues to harm different markets all over the world. Economies have been certainly affected and this could continue for a few more months. This is despite a clear slowdown in the expansion in some of the key countries such as Italy or Spain.
Many analysts have shown that XRP liquidity markets are showing new highs despite the current difficult economic situation. This can be related to companies moving funds across borders and exchanging fiat currencies.
Although this is good in the short-term, we need to understand which could be the effects in the future. Things can change as soon as economies fall. Transfers may be reduced and XRP could be hit.
Despite COVID-19 Slowdown Cryptocurrencies Could Be Harmed
As we have mentioned before, it seems that the COVID-19 crisis is slowing down. Some countries such as Italy are showing promising data. The number of new cases has been falling from its peak a few weeks ago. Despite that, politicians will have to make a decision on how to start reactivating the economy in the coming months.
As millions of individuals lost their jobs and many others are now in uncertain situations, cryptocurrencies remain at risk. The entire market received investment from individuals that were able to allocate extra funds. Now that several investors lost their main income, we might see lower demand for digital assets.
As @CobraBitcoin explained:
“People buy bitcoin when they have an extra cash to invest in something risky, and that’s during good times because when times are good you can afford to gamble and dream. Nobody’s going to buy BTC when they’ve lost their job, can’t afford their house, and are struggling to get by.”
Thus, XRP is involved in this current issue. As the third-largest cryptocurrency, we might see lower demand for the asset from investors. Currently, XRp sits at $0.183 per coin and it has a market capitalization of $8.08 billion.
Moving Forward In The Cryptocurrency Market
As we have explained in previous articles, cryptocurrencies are considered to be risk-on assets. This could be seen with financial markets highly correlating with Bitcoin and digital assets in the last few months.
Speculative investors are now moving towards the USD and safe-havens. In periods of crisis, users tend to move away from risk-on assets. They prefer to buy bonds and fixed-term investments rather than volatile and unpredictable assets. Bitcoin (BTC), XRP and cryptocurrencies are high-risk assets. Thus, they could yet experience a sell-off in the coming months if economies do not get better.
Individuals have invested large sums of money in holding strategies in the crypto market. This could reach an end if these users have to sell their funds to live. As abovementioned, many investors lost their jobs and they might need to sell their funds to live.
Surprisingly, all XRP liquidity indexes have reached new highs in recent weeks. We are talking about three different trading pairs:
As reported by the Liquidity Index Bot, Bitso registered an all-time high of 31,514,757 XRP. This is a Mexican cryptocurrency exchange that offers XRP/MXN trading pairs.
The BTC Markets with the XRP/AUD trading pair showed an all-time high volume of 12,058,945 XRP.
Finally, Coins.ph provides liquidity for the XRP/PHP trading pair. This reported an all.time high of 11,508,218 XRP.
It will be important to follow the trend of XRP volume in these exchanges. This could mean increased interest in XRP from companies that want to reduce costs in periods of crisis. Nonetheless, with a lower movement of funds across borders, XRP could be eventually harmed. These charts are going to be a good proxy of how healthy the XRP digital asset is and how the economy is behaving.
Finally, it is worth mentioning that Bitcoin is going to halve in just one month. This could eventually push prices higher in the near term. After the halving, Bitcoin and digital currencies could experience a price drop. This could increase selling pressure in XRP markets. However, it is just a matter of time to see what is going to happen in April and May.