China has one of the biggest crypto markets in the world, and there is concern that the recent coronavirus outbreak may have severe effects on cryptocurrencies.
The Wuhan coronavirus continues to spread
The coronavirus first infected humans on December 8, 2019, in the Wuhan, a city in the Hubei province of China. It is believed that the virus was passed on to patient zero through a live animal sold at a popular market, known for selling a variety of live animals. At the time of writing, over 100 people in China have died, almost 3,000 people have been confirmed to be infected, and the virus has spread to over 12 different countries.
China is a significant player in the bitcoin market
China is one of the leading global hubs for cryptocurrency – they boast the largest rates of investment in the Asia-Pacific region. There is a significant concern that the Wuhan coronavirus is going to have a significant effect on trading if such a major investment market becomes incapacitated.
Timing is everything
The Chinese New Year (which fell on January 25) is an essential day for Chinese investors. Traditionally, there tends to be increased activity around this holiday, with investors selling their stocks, and then reinvesting in the new year. This alone would generally create some volatility, but coupled with the current coronavirus-related trading; the market might see an even more significant drop, one that it can’t recover from. Jason Wu, CEO of Definer (a prominent crypto lender), suggests that the effects of coronavirus continue to get stronger, as investors were expected to buy back into the market. He believes that the virus is going to impact the amount that is reinvested profoundly.
Not all predictions are negative
Despite all of the gloomy forecasts and adverse effects that the coronavirus has been inflicting upon global stock markets, bitcoin has not yet been affected by this. The cryptocurrency was continuing its upward trajectory and closed the January 27 trading day in the green. At the time of writing, it was sitting at $8,925.96 and looks set to hit $9,000 very soon.
One of the reasons for bitcoin’s current good luck despite global economic turmoil is the fact that bitcoin (and other altcoins) behave like gold – they help to retain wealth as they are less susceptible to hyperinflation or potential recessions. Although Chinese investment might have severely slowed, this has not yet stopped the rest of the world from buying shares in an attempt to protect their wealth.
Still too early to predict
It may be too soon to fully understand the future of bitcoin in the face of the Wuhan coronavirus. Although the threat of the coronavirus continues to grow, investors still lack the understanding of the kind of impact it’s going to have on global stocks and cryptocurrencies. For now, it would appear as though bitcoin is unaffected, but this may change. If the situation in China worsens, their crypto investors may become incapacitated, creating a ripple effect through the global market.