What is the impact of Coronavirus on the blockchain industry？
The outbreak of the Coronavirus(COVID-2019）has developed beyond everyone’s expectations.
By 19th February, the total infection number was greater than 75,000, and more than 2000 people confirmed dead after being infected.
Now the prevention and control of the disease is the top priority. The Chinese government has taken the strictest measures including locking down Wuhan, a metropolis with 10 million residents. To reduce the risk of cluster outbreaks caused by centralized work. The government demands a self-isolation period of no less than 14 days when the labor force returns to large cities like Beijing.
However, the downward economic pressure urges enterprises to return to normal status as soon as possible.
Ja Guolong, the founder and president of Xibei Group, which has more than 400 restaurants in over 60 cities, said his enterprise may not survive this period. The Xibei group must pay 150,000,000 yuan in salaries to its 21,870 employees even though it has little income with most restaurants shut down. Ja said Xibei can only operate for another three months with current cash and accessible loans if the epidemic continues.
According to a report by Hengda Research Institute, the economic loss will add up to greater than 1 trillion RMB of the most relevant industries: Tourism, Retail/Catering and Film.
How will the blockchain industry be affected by the coronavirus pneumonia outbreak?
1. Blockchain fever cools down(Negative)
Since October 2019, the Chinese government has been actively embracing blockchain technology after President Xi blew the horn at the 18th Collective Study of the Chinese Political Bureau.
This trend continued up to the 2020 Chinese Lunar New Year. Local governments were absorbing the blockchain technology and giving encouraging policies to blockchain and other high-tech startups. Gigantic corporations (Alibaba, Tencent, etc.) were building their own blockchains or marketing their blockchain adoption. Blockchain startups were receiving much more attention from investors and potential business partners than ever before.
However, the clients of blockchain companies consist mainly of enterprises and governments. Therefore business development will suffer as local governments focus solely on the prevention of the novel coronavirus.
2. Regulation of crypto trading paused (Positive)
Although Chinese governments were granting encouraging blockchain policies towards the end of 2019, they were still cracking down on cryptocurrency trading.
According to the government’s official news agency Xinhua, 6 crypto exchanges were fully shut down and 203 offshore crypto exchanges were technically shuttered.
Now that they are focusing on the epidemic, crypto trading and exchanges are experiencing some leniency.
One of the biggest crypto exchanges, OKex, launched its 10th IEO after 3 months suspension. The OKex token reached its all-time high on Feb 15th.
Another reason that can partly explain the rise of exchanges is crypto trading people are being required to stay at home. They turn to full-time traders when the bitcoin price keeps going up.
3. The rise of bitcoin price can hardly catch public attention (Negative)
The bitcoin price rose by nearly 30% since 2020. But Chinese crypto community has not seen obvious growth like 2017.
One reason is that people are concentrating on another growing number — the number of cov19 infected. Televisions, websites, and social media are all being packed with discussions of the epidemic 24 hours.
Therefore it is very difficult to attract new crypto fans even if the price keeps going upward.
From another perspective, if the mainstream people are not brought to the crypto market, will the bitcoin price keep rising?
4. Startups (Neutral to Negative), PR Agency/Media (Negative), Investor (Neutral)
Most blockchain startups collaborated online to some extent before the virus outbreak. Working remotely is not a big concern in this space. The biggest issue is that some of the startups were carrying out fundraising campaigns. Now they have to wait until the epidemic ends. It will be very hard if they do not have enough cash to get through this crisis.
(Suggestion to entrepreneurs: Always remember to prepare enough cash, at least for 6 months runway)
However, the market is expecting a fiscal stimulus to restore the economy’s vitality after the epidemic. Blockchain startups may have a chance to benefit from the policy.
One of the biggest sources of income for PR agents and Media is hosting live events. Although they can still host online events, the income of such activities is not comparable.
As far as I am concerned, most of the crypto VCs were flexible on office regulation before the virus outbreak. Certainly, now their investment pace is slowing down. They are unable to have any face to face appointment with the entrepreneurs during this period.
5. Bitcoin Price (Not clear)
The relationship between the macroeconomic environment to bitcoin price is still an open question.
Some research argues that bitcoin will rise up if the global economic recession takes place. While others may hold a different position. They believe people will not purchase crypto assets when they are in poor condition, which also makes some sense.
Anyway, China’s GDP growth rate of Q1,2020 will probably slump. Considering that China’s GDP accounted for 16.9% of the world, the global economy is supposed to be brought down. But still, more evidence is needed to prove the correlation between the economic stagnation and the bitcoin price pumping.
If you are interested in Blockchain, VC investment, and Reading. Please follow me on Twitter: @jx_block
Special thanks to Jason Yap( @Ya_Jason) for his assistance in writing this article!
