As coronavirus continues to spread mass panic around the globe, its impact on bitcoin is becoming more evident. Here are three critical repercussions for BTC amid the outbreak.
As the Coronavirus Spreads, Bitcoin Continues to Break Out
Bitcoin is proving its worth as a macro hedge against global uncertainty. Year-to-date, BTC has achieved a 35% boost and managed to hit a yearly high north of $10,000 last week.
For many, this is clear-cut evidence to solidify bitcoin’s status as a risk-off asset. The notion goes that with China’s economy weakening, Chinese investors have piled in on bitcoin to make use of its safe-haven narrative.
On Feb. 3, one of China’s foremost stock indices—the CSI 300—plunged 9% in what was dubbed its worst open in over a decade. To add salt to the already festering wound, the Shanghai Composite Index nosedived 8%.
Chinese stocks quickly bounced back. An attempt at economic stimulus appeared to do the trick, with the Chinese government cutting interest rates to bolster the economy. Meanwhile, bitcoin continues to hold near $10,000.
For prominent crypto markets analyst Mati Greenspan, the correlation between bitcoin and the coronavirus dip is merely coincidental. Greenspan also said:
Amazingly, Chinese stocks have already fully recovered from the coronavirus dip. If stocks have scant been affected, it would be a difficult case to try and say that crypto has been noticeably moved by this.
China Quarantines Infected Cash. Can Bitcoin Fix This?
With the official death toll mounting to 1,775 and 71,811 confirmed cases of the coronavirus worldwide, China is stepping up its prevention game.
One of China’s latest methods to help quell the spread of the coronavirus involves cleansing cash.
China has begun using ultraviolet light or high temperatures to disinfect banknotes, according to a central bank press conference. The prevention strategy includes quarantining the banknotes for up to two weeks before redistribution.
Preceding the recent new year celebration, China’s central bank made an “emergency issuance” of four billion yuan notes designated for Hubei-—the virus’ epicenter.
For the crypto community, this provides another positive narrative as to why cryptocurrencies such as bitcoin are sorely needed.
With physical money no longer exchanging hands, the probability of infection is considerably lessened, say proponents.
However, bursting the bubble somewhat was Mati Greenspan, who remarks that bitcoin’s prevalence within China isn’t high enough to justify a replacement.
Bitcoin is not commonly used in China and therefore cannot be a viable replacement for cash. Especially when Wechat and AliPay are already widely accepted in the country.
Still, on a broader capacity, a switch to digital currencies could reduce the chances of infection.
According to a research paper from the Université de la Méditerranée, laboratory simulations reveal that the “superbug” MRSA can survive on coins. Meanwhile, the flu, Norovirus, Rhinovirus, hepatitis A and Rotavirus can be transmitted through hand contact.
Perhaps a switch to bitcoin isn’t such a bad idea…
Bitcoin Mining difficulty Declines
One relatively direct consequence of the coronavirus is its bearing upon bitcoin mining.
Chinese authorities have already begun shutting down crypto miners to contain the spread. Earlier this month, Jiang Zhuoer, founder of bitcoin mining pool BTC.Top announced on Weibo that police had forced the mining firm into closure:
[translated] Epidemic prevention in some places is already a mess. I have a mine in a remote suburb. The police came to force all the mining authorities and said that they would not resume work.
Thanks to a mixture of cheap electricity and resources, 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.
China’s clampdown is seemingly aligned with a reduction in mining difficulty growth. On Feb. 11, the Bitcoin network adjusted a mere 0.52% per data from BTC.com. This comes in stark contrast to January’s adjustments, which saw network difficulty grow 11.75% in total.
Bitcoin may become easier to mine as a result of this sluggish growth, which would allow retail miners—who are otherwise priced out—a slice of the action.