About one month ago, the Coronavirus was just an epidemic affecting China and some other countries. Still, it only affected us by suspending flights and packet traffic from China, and investors in Bitcoin began to seek security in times of economic uncertainty.
At that time, demand for the most popular cryptocurrency increased, and its price, after a long time, exceeded $ 10,000.
But with the announcement of the pandemic an, the economy, stock markets, and the cryptocurrency also reacted. Bitcoin and other cryptocurrencies turned out to be not such secure assets in times of possible recession, so a big sell-off started.
Recently, the price of bitcoin has dropped by more than 25 percent and has fallen to around $ 6,000. However, many people believe in the power of the Bitcoin revolution. If you are one of those, visit cryptotrader and start making money right away!
The Coronavirus has been highlighted this time as the root cause of the decline in bitcoin. Investors seem to have forgotten about the optimism associated with the upcoming “halving” or halving of the rewards generated by mining. At this time of crisis, they no longer consider bitcoin a “safe harbor” when other, non-digital assets fall.
Why are all the countries trying to “flatten the curve of the epidemic”?
The measures taken with this objective seem to have achieved their effect. Countries like China are experiencing, for the first time, a reduction in the magnitude of the emergency they are facing. Others, like South Korea, have also kept the crisis within bearable standards, with less than 1% mortality.
On the other hand, countries like Italy, which failed to flatten the curve, are facing death rates ranging from 4% to 6%, now requesting China’s help to combat the disease.
But the case of the United States is perhaps the most dramatic. Despite the resources that the American country has, it is one of the nations that are conducting the least tests for Coronavirus. In the long run, that will result in higher infections in this country.
The effects of Coronavirus on the economy
Now, although undoubtedly the worst effect of the Coronavirus is the unfortunate loss of human life, the consequences it is bringing on the world economy are not negligible either. It has caused a real collapse of the financial system, which has ended up affecting cryptocurrencies.
One of the primary measures to prevent the spread of the Coronavirus and “flatten the curve” is social distancing. Avoid social contact by reducing it to the minimum possible. That includes stopping standard work and asking employees to work from home.
That can have a minimal effect on companies that provide services or whose activity is mostly online.
However, for manufacturing companies and other commercial activities, this measure can be fatal because it prevents employees from doing their jobs and therefore disrupts global supply chains. That is something that has been observed since the beginning of the quarantine in cities in China.
The consequences of this on the world market were immediate. Firstly, there was a fall in the price of oil because economic activity was reduced to a minimum, and so was energy consumption. Lower energy consumption means lower oil demand and, therefore, a lower price of the oil barrel.
Furthermore, this drop in the price of oil was intensified due to the confrontation between Russia and Saudi Arabia. It was about cutting production and protecting the price of a barrel.
Therefore, by not reaching an agreement, the Arab countries began to cut the sale price of its oil and announced an increase in crude oil production to reach 10 million barrels a day. What caused the oil price to collapse, falling 30% in a single day.
But this collapse has not been limited only to the oil market. Traditional financial markets have also been affected by the Coronavirus.
World stock markets have suffered a period of absolute collapse, especially in New York. During that time, the reduction of essential indexes, such as the S&P 500, demonstrates the desperate situation in which many companies find themselves facing the panic caused by the disease worldwide.
The crypto market and other value reserve assets
In a situation like this, the usual thing for markets would be to look at value reserve assets. Those are the financial products that do not have a direct relationship with the world market. That means, when the international economy derails, these assets maintain or even increase in value.
However, this time, the instinct has proven wrong. Far from increasing the market value, facing the panic caused by the Coronavirus, value reserve assets such as gold and Bitcoin have suffered dramatic falls in their price.
This fact has only added questions to financial analysts, for whom the effects caused by the Coronavirus are challenging to understand.
Without a doubt, the most complicated case in recent days is that of the fall in the price of Bitcoin. It has been much drastic than that of any other asset or market in the entire world, having lost about 48.10% of its value.
The collapse of the cryptocurrency is more acute than that of other assets. The reason for this is the reduced size of its market. That means that any movement made in it can have a significant impact on the price of the crypto actives.
Predictions about the future
If anything should have been clear by this point, it is that the Coronavirus is not something that can be taken lightly. By contrast, the disease originating in China is one of the biggest challenges humanity has ever faced in its history and one against which society must remain united.
While waiting for the results of the first tests of vaccines for Coronavirus, there are currently at least eight simultaneous projects worldwide, trying to develop the first vaccine against the disease. That is humanity’s best bet to slow the advance of COVID-19.
Meanwhile, “flattening the curve” seems to be the most logical strategy to avoid the worst effects of the disease worldwide. It is everyone’s responsibility to minimize the adverse impact of Coronavirus in society.