Although cryptocurrencies have been around for more than a decade now, they are just now beginning to gain steam and make their way into the consciousness of the general public. That being said, many still do not understand exactly how they work or how they fit into their overall financial picture. This is particularly true for Americans. While many Americans may look at cryptocurrencies as simply another investment in their portfolio, cryptocurrencies are actually the first truly global currency, which many people around the world use for their daily transactions.
There is no doubt that cryptocurrencies can be volatile, which is what makes many Americans hesitant to invest in them. Although there is certainly a strong connection between cryptocurrencies and the stock market, it can sometimes be difficult to discern exactly what that connection is. At times a rising stock market also creates a corresponding rise in cryptocurrencies, while at other times they will move in opposite directions. It is always important to understand that while the American stock market may have global offerings and many American businesses are actually global conglomerates, they are still not global on the same scale that cryptocurrencies are.
While the financial health of certain large players such as China, India or the UK may have an affect on American businesses, they still don’t create the same effect that cryptocurrencies do. Each of these countries benefits from having relatively strong central banks and systems that work to keep inflation in check. Other countries, however, suffer from corrupt or ineffective governments that fail to keep their currencies strong on a global market. While Americans may look at cryptocurrencies and see a high degree of volatility, that volatility can actually be low in other countries when compared to their local currency.
That being said, there is no doubt that supply chain issues and ongoing Covid threats are having an impact on global markets, which is, in turn, having an affect on even cryptocurrencies. When global economies are strong, cryptocurrencies are strong. When global economies falter, so do cryptocurrencies. That being said, the more glaringly obvious the causal link is, such as a global pandemic, the more likely those economies are to recover. While cryptocurrencies may have experienced a strong recent downturn thanks to global market conditions, there is no reason to believe they will not bounce back fairly quickly.