How Coronavirus Changes the (Crypto) World
Well, well, the whole universe talks about this new Chinese coronavirus. It frightens people not only in China but in distant corners, as well. Economists say that we may enter a new worldwide financial crisis due to this outbreak, the majority of stocks are in red, but cryptocurrencies see a significant and steady rise. What’s happening? How to react? Is it time to buy, sell, or forget all and go to the nearest underground vault?
Let’s analyze the situation together with the Superorder team. And remember to use your critical thinking! Check different sources, compare reports, and think calmly to see real facts instead of propaganda.
A Roundup on 2019-nCoV
The Wuhan coronavirus also named the 2019-nCoV appeared for the first time in Wuhan, China in December 2019. The main danger is in its deadly viral pneumonia. As for now, there’s no vaccine at all. It means that the outbreak may rise new heights as more and more people will be infected.
Almost all leading news agencies have dedicated pages with live updates on the outbreak. Still, we prefer an all-in-one interactive map by the CSSE at JHU. It gathers information from the World Health Organization, American and European disease control centers, and Chinese healthcare sources. So, here are the numbers for 07.02.2020:
- Total confirmed cases: 31,528 in 26 countries with the majority in China.
- Total deaths: 638 with 2 outside of mainland China — in Hong Kong and Singapore.
- Total recovered: 1,764 in 7 countries with the majority in China.
To compare, another coronavirus known as SARS infected around 8,500 people and killed 774 in 10 months in 2002–2003. Evidently, the outbreak we have now is already more dangerous. And we still don’t know how to fight the disease.
If you want to check the recent news, consider following reputable agencies like CNBC or The New York Times. Don’t forget to track different sources to get a complete picture. Ideally, check also reports from the WHO.
General Influence of Coronavirus
Moving to the outbreak’s results so far, we should admit that the situation also looks threatening. People die, the infection spreads, so governments (mainly, in China) try to stop it. For this, local and national authorities restrict travel and shipments, create quarantine zones, and invest more and more to spot the virus as early as possible.
Particularly, China moves towards serious isolation. It locked Wuhan completely, prolonged the Lunar New Year holidays, and halted many operations in different regions. As a result, the Chinese economy faced a significant decline that also affects partner countries. To be precise, we can end up with an even greater recession than in 2008.
Here are a few distinct falls related to the outbreak. These numbers are the result of reduced import/export volumes related to China:
- Indices. S&P500 and Dow Jones decreased by 1.58% on January 27.
- Iron ore. The price moved from $95 to $85 a ton.
- Oil. Brent dropped from $70 to $59 a barrel, WTI — from $65 to $53.
- Soybeans. The rates fell from $9.5 to $8.9 a bushel.
- Stocks. Airlines and hotel groups that work with China feature the worst results.
However, the disease affects cryptocurrency markets and ecosystems, too. Let’s discover how!
Influence of Coronavirus on Crypto
1. Huge Bitcoin Price Surge
First and foremost, problems of traditional markets lead to the success of alternative options. There are two prominent backup assets that are extremely widely used for hedging risks: gold and Bitcoin. Real physical gold is known for its ability to rise during problems at stock markets. It surged greatly after the 2008 crisis, it continues rising nowadays. The same is true for Bitcoin except for the fact that the modern situation is the first challenge.
BTC/USD moved from around $7,000 to $9,800 since the beginning of 2020, hitting a 30% jump. The main reason for this rally is similar to one related to a gradual rise of gold. Investors take their funds from traditional economies that go down and put them in alternative systems protected from negative influence. Thus, Bitcoin is a safe haven for major individuals and even institutional investors now.
2. Mining Companies Hurdles
Apart from BTC and gold jumps, there’s no more good news. In other cases, the 2019-nCoV damages the crypto world similarly to the traditional economies.
For instance, it threatens to break the whole supply chain of mining hardware companies. Almost all Chinese businesses involved in this manufacturing reported hurdles, including Bitmain, Canaan, MicroIBT, and InnoSilicon. The last team faces the worst issues as its HQ is located in Wuhan, the outbreak ground zero.
Companies report that they had to limit shipments and stop pre-sales. But the most dangerous trend relates to post-sales and maintenance because manufacturers can’t provide the demanded services. All representatives agree that the case isn’t too disruptive now but it can turn into real trouble if the virus continues spreading.
3. Stops and Delays of Events
Another negative consequence relates to meetings, conferences, and summits. Several of them were planned for this winter in China and neighboring countries. All of these major Asian events were delayed or canceled. In particular, here are examples:
- Binance Blockchain Week Vietnam. The exchange planned to conduct meetings from February 29 to March 9. The new dates aren’t revealed yet.
- Hong Kong Blockchain Week 2020. Hosts announced that they will put the event planned for mid-March on hold.
- TOKEN2049. Another summit that had to be held in Hong Kong in mid-March will be organized on October 7–8 instead.
4. United Charity Actions
Finally, the whole crypto community united in the face of the problem. Binance pledged $1.5 million to the victims and launched a global campaign to purchase medical supplies and deliver them to hospitals in Wuhan. As for February 6, the foundation has bought over 470,000 of supplies and shipped around 178,000.
The campaign was supported by other players. TRON published its own appeal mentioning that the epidemic clearly exemplifies how connected we are in our bodies. Some independent startups and investors also donated significant sums to help China and Chinese people to fight the outbreak.
Potential Consequences in the Nearest Future
As for now, the influence of coronavirus starts decreasing a bit. Economies faced the first shock and now plan to return to stabler positions. However, we can’t be sure about the next market movements. They will depend on the successes or failures in the development of the vaccine, mostly, and other governmental actions towards outbreak prevention. We will monitor the news related to markets and BTC, especially.
