What to expect in this article?
- How does Coronavirus impact Bitcoin’s price action?
- What impact does the virus have on the halving?
- Vulnerabilities of bitcoin exposed by coronavirus
- What happens if this panic goes on longer?
First things first, we wish everyone safety and those impacted a speedy recovery. We want crypto to thrive in a happy and healthy world, not in a post-apocalyptic doomed future.
This article is written as an answer to the question “Will coronavirus impact bitcoin during halving or in future?” purely as an conversational point of view, without undermining the devastation that virus has been leaving behind its trail.
How does Coronavirus impact bitcoin’s price in general?
The most impacted coronavirus countries include China and South Korea. China holds about 65% of mining power behind bitcoin’s network. South Korea represents one of the most pro-bitcoin/crypto countries in the world. In fact, South Koreans rallied the market in 2017-18 to new highs.
With two most important crypto nations being badgered by this virus, bitcoin is naturally experiencing the impact of the virus.
In case of emergency – people flock to safer options
It is our human nature to flock to safety in case of an emergency. For China and South Korea, this virus represents such safety. What do people need the most during times of crisis? Food, water, medical supplies and essentials; Most places have not come to accept bitcoin, that means, people will cash their crypto to fiat to be able to buy essentials to keep the families safe. Any sane person would prioritize well-being and family safety over long-term crypto prices.
Bitcoin as safe-haven, yes, but not there yet
Bitcoin is viewed as digital gold. Just like gold, in case of emergency, people do not trade in gold, they encash their gold stacks for fiat to afford things that are most needed to survive. Same thing goes true for Bitcoin. While it is still regarded as safe-haven, we would imagine that people in China, South Korea, etc., are liquidating their crypto holdings to deal with this virus emergency right now and they may not be buying crypto just yet. This has a direct correlation to price movement in bitcoin and crypto.
It is just a matter of time when cryptos become more accessible
Number of places that accept bitcoin and crypto are growing each day, however, they are not at a mass accessible. You cannot go to CVS or Kroger today to buy supplies using crypto. Because of this inconvenience, people will always lean toward fiat in times of panic. Amazon has run out of face masks in the US and those who do have the supply are charging massive premium. And, at the time of this shortage, the US had literally no reported coronavirus cases.
In our opinion, this coronavirus outbreak will continue to beat Bitcoin prices down because of: fiat familiarity and accessibility, especially during times of emergency.
Experts believe Bitcoin could rally higher in the face of virus
While the experts believed that the virus would have a positive impact on bitcoin prices, our opinion is quite the opposite. As discussed above, Bitcoin and cryptos are not accessible by the general public and you cannot easily exchange crypto for essentials, this lack of inaccessibility at this time of bitcoin’s evolution will work against it from a price point of view.
In a distant future when bitcoin and cryptos are accepted as medium of exchange on a mass scale – we would see resilience in bitcoin’s stability.
Will Coronavirus impact Bitcoin’s halving?
Majority of the miners are in China. The mining farms have not been impacted just yet by the coronavirus but if the outbreak evolves into a pandemic then the quarantine can be extended even more and that could impact every business in China, including bitcoin farms.
Halving needs newer mining equipment
Once the halving takes place, the existing equipment could be inefficient in mining. Mining farms replace the old equipment to meet the new algorithm challenges. If quarantine continues the manufacturing of new machinery will be limited, thus limiting the mining farms ability to keep up with the demand.
We might even see halving date pushed a bit further
Binance reported that bitcoin halving could happen 3 weeks earlier than scheduled due to an increase in hash power. Well, if the virus panic continues and China continues to take the beating, then, it is a real possibility that halving might get delayed a bit due to stagnated or reduced hash power.
If the virus is not contained sooner, we might see a continued price correction of bitcoin and possible $6500 range, in our opinion.
What happens if this panic goes on longer?
Needless to say, if the panic continues for longer then all of the financial markets will take a beating and that includes bitcoin. We might even see 2008 level market slump if the panic intensifies or is upgraded to a pandemic. While we expect (hope) that an announcement of ‘containment’ and eventual cure/vaccine will be in news soon, we need to see if that will be really ‘soon enough’. If such an announcement doesn’t come about soon enough, we might see a continued beating in the stock market which in turn impacts the job market which in turn impacts spending. Impact of such a spiral might linger long after Coronavirus has been contained.
Has the virus exposed vulnerabilities of bitcoin?
Bitcoin doesn’t need a middlemen so you will have access to your funds without worrying about ‘some bank’ shutting its doors down during an emergency. However, you cannot spend your bitcoin on essentials because the market is not there yet in its adoption. In times of panic, people flock to the familiar options – bitcoin has not captured that ‘familiarity status’ yet. Bitcoin is only safe and operational as long as it continues to enjoy strong mining support – what happens if all the farms in China, even temporarily, shut down? This impacts broader crypto space as well and might expose the networks to 51% attack.
Rebound is inevitable once the virus is contained
Once the virus is contained or the hope that the virus is close to being contained emerges, markets will rebound. Stock market and bitcoin will both rebound, bitcoin might see a sharper uptick because of people trying to buy back into bitcoin post-panic.
We are hoping that the cure is found soon.
Thank you for reading and sharing this article. We appreciate you.
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