Look at last month's Bitcoin price and you'll see an unprecedented trend for a while: a steady increase. Bitcoin has risen 31% in the past 30 days and has reached its highest level in more than three months, breaking the $ 10,000 mark once again. There are a number of factors that motivate this increase and cannot ignore the appearance of coronavirus. But a virus that infected more than 38,000 people, mainly in mainland China, is the factor responsible for the strong Bitcoin price?
Price of BTC over the last 1 month | Source: Coinmarketcap
Three reasons Corona virus can affect the price of Bitcoin
1. Corona virus may cause damage to the Chinese economy of 62 billion USD in the first quarter of 2020
China may have to cut taxes, increase spending and cut interest rates to revive the already fragile economy currently devastated by the Corona virus outbreak.
The economic impact of the virus is still unclear, but state-run media and some economists have said China's growth rate could fall 2% this quarter because of the outbreak, causing much of the country is at a standstill. A decline on that scale means that the country's growth will lose $ 62 billion.
Many experts even think that China may not be able to fight the disease on its own and soon revive the economy. Growth last year was the weakest in almost three decades, when China was faced with rising debt and the collapse from the trade war with the US.
Corona virus first appeared in Wuhan city, killing more than 800 people. Before the outbreak, the government was more worried that the social unrest of the virus could become an issue that could boost unemployment.
Major banks have cut interest rates for small businesses and individuals in the hardest hit areas. The Central Bank of China said it would allow residents of Wuhan and the rest of Hubei Province to delay their payments and loans for several months if they lose income because of disruptions.
The Central Bank of China said it would ensure enough liquidity in the financial markets when it reopened next Monday after the 10-day Chinese New Year holiday. When the Hong Kong market reopened earlier this week, the Hang Seng Index (HSI) fell nearly 6% after only a few trading days. But what does this have to do with Bitcoin?
2. Bitcoin operates independently of other markets
Economic uncertainty and stock market instability have long led people to Bitcoin. You don't need to look further at the origins of Bitcoin itself, which stems from the growing distrust in the economy after the housing bubble and the collapse of the stock market in 2008. Recently, fear on the declining local currency, such as from hyperinflation in Venezuela and unrest in Iran, has led people to turn to Bitcoin as a safe haven.
Although the Bitcoin price does not work in opposition to the stock market, it does not seem to be affected and operates independently of the stock market. After that, it was no surprise that concerns related to the Chinese economy increased, Bitcoin price was rising and when the stock market became volatile, Bitcoin price remained stable. When the value of Yuan became uncertain, Bitcoin provided a great store of value and a beacon of hope.
3. 65% of Bitcoin mining activities take place in China
There is another reason why the price of Bitcoin may increase as the corona virus spreads. And that's 65% of Bitcoin mining activity takes place in China. When the labor force is quarantined and global trade is stopped, that means: few Bitcoin miners are available to work and less mining equipment out of China. In other words, Corona virus is affecting mining activity, which can then drive Bitcoin price up.
And don't forget to halving BTC
Despite all of the above, it is difficult to determine the increase in the price of Bitcoin for the corona virus. Doing so would be ignoring the fact that halving Bitcoin will occur in just a few more months. Bitcoin price predictions have long shown this event to be a catalyst for higher prices and it is reasonable to assume that at least some of the steady gains were due to FOMO from the event.
Whatever the reason, one thing is for sure: With a 30% increase in 30 days, Bitcoin is back to work.
Disclaimer: This is not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.
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