What began in the Chinese province of Wuhan, has become a worldwide health crisis. As of the writing of this article, over 700 people have died, and thousands more tested positive for the virus. It is the second-largest outbreak humanity has faced in the last decade. But how does it related to cryptocurrency? That is where experts and insiders seem to disagree. It’s a case of inconclusive data, so here is everything you need to know according to David Pan, Shaun Djie, Paul la Monica, and Jason Wu.
Bitcoin, China, and miners
David Pan, Coindesk reporter, and Jason Wu, CEO of crypto lender DeFiner, have a bearish look on the immediate future of Bitcoin as well as the immediate future of cryptocurrencies.
The first problem facing the market is miners. As Pan explains, 65% of current miners are in China. Moreover, most of the largest manufacturers are also in China. So while the consequences of the coronavirus outbreak might not be felt immediately, there are long term-problems.
Bitmain, Canaan, MicroBT and InnoSilicon are all reporting delays in production thanks to the coronavirus outbreak. The pressure to deliver the latest machines has been increased after Bitcoin is scheduled for halving sometime in May of this year.
Abe Yang, COO for PandaMiner, expressed further frustration with the current outbreak because it affected his company’s ability to keep up with current computational demands. As he said to Coindesk
Not only us, most miner makers have been affected by the outbreak since their factories are based in cities like Dongguan and Shenzhen in Guangdong province. […] During the extended holiday until Feb.10, almost all (of) the production will be halted.
The lag in product delivery will slow down the Bitcoin network, which, in return, will push investors to other currencies. And without a timetable in-sight, the hit to Bitcoin might last months or years.
The frustration felt by Yang was confirmed by Wu, who had to cancel several meetings thanks to rising virus concerns. As Wu sees it, China is the capital of the crypto market. And the way things operate in the land of the dragon is by marketing events. These events are vital in bringing much-needed investment, which boosts crypto prices.
Additionally, Yang also explains that the most prominent crypto market in China is retail stores. Bitcoin, Ethereum, et al. gives Chinese sellers the ability to trade with anyone, anywhere without restrictions from the Chinese government. However, the coronavirus has put unwanted pressure of these retailers to temporarily close doors, as fears of more victims spread throughout China.
The end is not near
The coronavirus outbreak has just begun. And, market pressure is bound to drop Bitcoin’s value as well as other cryptocurrencies in the nearby future. Wu and Pan recommend investors to do just like Chinese retailers do, cash in now to cover the loses. The market is pushing up, but the drop will be sudden and unexpected. So it’s better to have money at hand than to watch it all go away once miners cannot keep up with hash demand. And, while that is happening, there is still an entire nation (the same one which holds 65% of mining power and is a crucial player in cryptocurrency) unable to do business thanks to the outbreak.
Fear and opportunity
Things may look bleak for some, but La Monica and Djie disagree with that vision of the world. As things stand, Bitcoin has risen 10% since the virus was announced and 30% YTD. It is, by far, the best start of the year XBT had seen since 2012 when the currency used to be under the ticker BTC.
Brexit, US-China trade talks, Iran, US Impeachment Results and incoming election are all weighing heavily on investor’s shoulders. The uncertainty has pushed traditional investors to seek refuge in gold and cryptocurrency. It is why gold has seen one of the biggest rallies in recent memory.
Djie puts it simpler.
The recent bitcoin rally can be attributed to ongoing economic uncertainties. (And) There is no doubt the rise in bitcoin price correlates to the ongoing outbreak.
He goes on to explain how gold is enjoying a 7 year high thanks to the same reason Bitcoin is surging. It’s all about the global economy. Interest rates are low, and fear is high. XBT is seen as a safe haven. And that will keep being true until a more reliable cryptocurrency comes along.
Wall-Street loves crypto
China may be the biggest crypto market, but Wall-Street has made sure crypto-investments are mainstream. Square and Facebook have been leading the charge by embracing crypto technology. But it does not end there. The Chicago Mercantile Exchange now validates mutual funds and hedge funds that trade with Bitcoin. And, of course, the SEC is in the process of approving the first crypto-backed ETF.
Wall-Street loves crypto, and crypto loves it back. The virus has been a blessing in disguise because it is pushing the adoption of cryptocurrency in the US. […] There is no short-term or long-term future where Bitcoin and Ethereum are cut of mainstream banking. Running away from crypto would be suicidal.
Crypto and You
What does this all mean for your investments, well, it all depends on who you’re asking. The naysayers will paint a picture in which the coronavirus outbreak is nothing but a trouble maker for a fast-growing market. So better sell now before problems make it unbearable to trade, and everything collapses.
The optimist will call it an opportunity. Like gold, Bitcoin is a safe place for investors. Therefore, the longer the outbreak last, the more they will rush to XBT. Save your coins, and you will be able to ride the bull to the top. Sometimes it is that simple.
There is only question left to be answered, are you a bearish investor or a bullish one? Depending on your trading pattern, then you can decide on which side to be. However, it would be wise to wait until the fog clears before making any moves.