The price of Bitcoin dipped below $4,000 in the last few days as of the publication time indicating that even cryptocurrencies are not immune to the influences and downturns of the traditional financial markets. Bitcoin suffered its biggest drop in seven years, as fears over the spreading coronavirus are triggering a new wave of selling everything from stocks, bonds to cryptocurrencies. This is a 5 min read on the Effects of coronavirus outbreak on crypto Market, where you get a brief about the situation.
Volatility In Crypto Market As COVID-19 Surges
The global economy is slowing down and with the fear of spreading coronavirus leading to a universal deceleration, all the benchmark indexes are dropping. The sell-off appeared to have been sparked by the COVID-19 outbreak alongside the wider turmoil experienced in the traditional financial stock markets.
More than 128,000 people around the world are now infected and the illness had caused over 4,700 deaths. It has fueled massive disruption to the operations of companies and events.
Experts are speculating that all this can potentially cause a black swans event. But that black swan event may already be here in the form of the coronavirus. It’s already causing traditional markets to collapse, and the high-risk cryptocurrency asset class maybe next to experience a panic-induced selloff of catastrophic proportions.
A black swan event is a term popularized by finance professor and former Wall Street trader Nassim Nicholas Taleb, who authored a book on the 2008 recession.
The coronavirus is potentially one of those black swan events. The coronavirus in just a few short months went from an unusual ailment to a widespread pandemic on the verge of collapsing the economy.
Simon Peters, analyst and cryptocurrency expert at investment platform eToro said:
“Previously seen as a possible safe haven in difficult times, investors now seem to be selling out of Bitcoin to take back liquidity in case the coronavirus spreads even further”
“In a time of uncertainty, many investors might feel it is better to own cash or gold rather than more speculative crypto assets like Bitcoin, while others might be looking to free up cash to invest in stocks if and when the situation starts to improve.”
The death toll is sending investors into a downward spiral of panic, which prompted the largest one-week decline in the stock market since the great recession!!
Financial markets tanked in response to the COVID-19 outbreak. Bitcoin and the technology powering cryptocurrency assets was born from the last major economic recession. For the crypto community, this provides another positive narrative as to why cryptocurrencies such as bitcoin are sorely needed.
But one person who did not seem too concerned about the sudden crypto drops was National Security Agency (NSA) whistleblower Edward Snowden, who tweeted:
This is the first time in a while I've felt like buying bitcoin. That drop was too much panic and too little reason. — Edward Snowden (@Snowden) March 13, 2020
Daniel Wolfford, who trades Bitcoin and is a former head of cybersecurity of Blockchains LLC added that the wider markets and crypto-exchange platforms are easily manipulated by “whales” — people who hold large amounts of cryptocurrency and can mess with supply and demand.
He explained how whales can be “highly emotional and speculative,” but also placed some blame for the ongoing volatility on the websites used to trade in cryptocurrencies.
How The Crypto Market and Coronavirus Could Be Related?
Coronavirus – the killer virus not only affecting humans but also to the kingdom of cryptocurrencies all over the world.
The price of bitcoin faced a sudden hedge in its growth. Why did this happen? The main reason is the virus originated from china and has spread with big waves inside the country.
China is the leading country for bitcoin and cryptocurrency-related transactions. As the virus spread over the country people are not able to continue their daily work, as usual, this caused the countries economy and stock market to witness a huge decrease.
Investors are afraid to invest in the china market, china based crypto exchanges, stock markets, and many countries have stopped importing or exporting goods with china.
All these things made the Chinese finance market and hence the bitcoin market fall down. If the virus were stopped before spreading to other countries, the global market could have been isolated from this much of a disaster.
Chinese authorities have already begun shutting down crypto miners to contain the spread. China dominates as much as 65% of bitcoin mining. The loss of mining firms presents the crypto community with a double-edged sword.
On one side, bitcoin mining centralization could be reduced, further supporting industry ideals. On the other, network health could be negatively affected due to a lack of miners.
But, sadly, the virus has now spread to more than 30 countries, this made the huge wreck to the global finance market.
When fears of coronavirus were still hot, traders of cryptocurrency were facing highly volatile markets due to the spread of the virus.
The number of virus cases reported in the rest of the world has exceeded the spread in China which has given rise to new fears. But, on the global economy in general, the virus is certainly leaving no stone unturned to instill fear and lack of confidence.
Many crypto experts have enumerated that one specific event will not have any bearing on the currency as there has been no correlation analyzed to date. One event cannot be conceptualized as a catalyst for its doom. Crypto is currently seen in a safe haven unless there is a monetary policy gone wrong!