Cryptocurrencies and coronavirus: how the epidemic affects the global economy and digital assets

Epidemic and economic crisis

Air carriers cancel flights, major manufacturers freeze production, marketplaces suspend deliveries, and entrepreneurs transfer employees to a remote mode. After the opening of trading on the Chinese market on February 3, the stock indexes of Chinese companies instantly lost 8% of the value. Capital Economics experts believe that due to the further spread of the disease, in the first quarter of 2020, the global economy will lose $ 280 billion:

The economist still hopes that the epidemic will be stopped, and by 2021 the world economy will catch up, although the regions of Asia will suffer serious losses, as many countries are highly dependent on the PRC. Also, financial losses await Australia, which annually receives a huge “flow” of Chinese tourists.

In a report from the Central Bank of Russia, analysts called coronavirus a more serious threat to the economy than previous recent epidemics:

According to the International Monetary Fund, the share of China in world GDP over the past 9 years has risen from 14% to 19%, and this makes any Chinese problems not only Chinese. Especially when it comes to epidemics that all countries in the world devote all sorts of resources to combating. Some analysts draw analogies between the current situation and the economic crisis of 2008, believing that we can expect the same consequences. For financial markets, this already affects the increased volatility of assets, which will continue to grow until the peak of infection.

How will this affect Bitcoin? 

 In the conditions of such an unstable market, investors will look for assets that will allow them, at a minimum, not to lose capital. Better — make money. And such a market, showing an inverse correlation with the top indices of China and the USA, is cryptocurrency. Back in January, Twitter users began to share screenshots of charts that displayed the inverse relationship between the exchange rates of the S & P500 (USA) and A50 (China) indices on the cost of Bitcoin.

An asset that world banks cannot control, which is in great demand and has grown thousands of times over the past 10 years. Any problems with the price of oil, with the indices of American or European companies in no way, reduce the demand for a coin. And, as the data show, on the contrary - they make it more expensive. 

Bloomberg analyst Mike McGlone believes that amid instability in classic markets, Bitcoin looks like a safe tool. For example, the technical indicator GTI Vega Band shows the continuation of the upward trend of BTC. The expert is sure that if the market continues to remain in the red zone, Bitcoin may become the main beneficiary. In addition to BTC, many altcoins have become “green”.

Ilya Buturlin also believes that the coronavirus epidemic, if not stopped, can seriously threaten the country's economic security. The consequences can also be very different: up to restrictions on the movement of fiat money and other assets. In order not to lose the business, many entrepreneurs will begin to use Bitcoin as the main means of payment for cross-border payments. China already shows the largest demand for cryptocurrencies and specifically BTC, and this situation can only increase demand, strengthening the price of a coin.

Analyst 8848 Invest Viktor Pershikov connects the epidemic with the suspension of gold mining, the leader of which is China. Accordingly, precious metals can become more expensive, and the yuan - cheaper. As in the spring and summer of 2019, when the correlation of BTC-CNY was quite high, this will also affect the price appreciation of the first cryptocurrency.

The dependence of Bitcoin growth on crisis situations of global importance was once again noticed during the January tensions between Iran and the United States.

What to expect in the near future?

What effect can a coronavirus outbreak have on the world order in the near future? If you look globally, there are already a lot of different forecasts, some of which predict the second “Great Depression” of 1929-1939 in the USA, which this time will cover the whole world. However, such theories do not yet look convincing, because diseases have always scared people. The world from books knows about outbreaks of plague in Europe that devastated cities. Even influenza epidemics claimed the lives of more than 60 million people in the 20th century.

Although a million deaths in 1968 had almost no effect on economic growth, and 2000 deaths instantly collapsed Chinese quotes by 8% in 2020, and also adjusted the prices of metals and oil, the consequences of the epidemic will most likely not plunge the world into chaos. It is likely that most of the fluctuations in the value of assets in the markets are associated with hypertrophied perception of news and panic due to the large number of fakes. If China and other countries manage to stop the spread of the disease and finally prepare the vaccine, the economic slowdown this year will be no more than 1% for world GDP and 5% for China's GDP. In turn, until the situation has stabilized, investors and financiers will switch to alternative means of payment, which will be a factor in the growth of BTC.

In this situation, a combination of factors will play a role. But it is already clear for sure that in the conditions of the economic crisis, Bitcoin really looks like an attractive investment, especially in the information and news field. In any case, any cardinal changes, both in the global economy and in cryptocurrency markets, are possible only if the disease really gets the status of a pandemic. With the current dynamics, one should not expect serious permutations and a “crypto victory over fiat,” which is even better in this situation.