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March 13, 2020

What Does Coronavirus Mean for Bitcoin?

March 13, 2020

The Coronavirus and the effect it is having on Bitcoin is on the minds of all of those with investments in cryptocurrencies. Are the tragic events that started in China, and are now spreading worldwide, having the assumed effect on the price of Bitcoin? Is the crypto-economy taking a hit?

With the World Health Organization’s announcement that the Coronavirus (known as COVID-19) is now considered to be an epidemic, we all have a reason for concern. While the sensible advice is not to panic and take reasonable steps to protect ourselves, it is only natural to worry.

The medical advice is to avoid crowds, shaking hands, unnecessary travel, and anyone who is sick. You should wash your hands regularly and use alcohol-based wipes.

In another vein, as a result of the outbreak, the world’s financial markets, the price of oil, etc. are in turmoil. We see some of the most significant losses in financial history and there is real uncertainty about what will happen next.

For us Bitcoin enthusiasts, we need to look at what will happen in the short and long-term. Let’s consider what is likely to happen next.

How has COVID-19 affected Bitcoin?

Bitcoin prices have dropped from over $10,300 in mid-February to just over $7,500 as of writing. The effect of the crisis in China is difficult to process.

It could be that the official Chinese Government’s assumption that things are improving is real, and local investors are motivated to diversify their Bitcoin dealings into the local market. Or it could mean that people are so desperate because of quarantine and being unable to work and earn money that they are selling Bitcoin to buy necessities.

It could also mean that specific regulatory challenges that cryptocurrencies are facing from the stock exchange commission in the US are a far more significant reason for the price volatility.

Throughout its history, the price of Bitcoin has always been prone to rapid change, so this is nothing new, and it is not linked to the behavior of conventional money markets or worldwide trends.

In recent weeks, various analysts have said the Coronavirus has been the reason for both an increase and a decrease in Bitcoin value. I believe this pandemic has had only a limited effect on the price of Bitcoin, but it could be opening up some significant opportunities.

China is the epicenter of COVID-19, and some desperate measures are being put in place. One such measure that has had a direct effect on Bitcoin is that the Chinese government has started shutting down Bitcoin mining companies such as BTC Top.

Due to certain favorable conditions, China currently operates around 65% of the world’s Bitcoin mining operations. If they are all shut down, there will be tremendous opportunities to make money again through mining operations.

How will the Coronavirus affect Bitcoin prices for the rest of 2020 and beyond?

The best prediction of what will happen next is that the Coronavirus will actually help the price of Bitcoin due to the effect on global economies.

It makes sense that people will look for an alternative way to make investments than the falling stock markets. Gold and Bitcoin will probably be the primary beneficiaries.

We have even seen the Chinese government quarantine cash to help sanitize banknotes from the Coronavirus. It added 600 billion Yuan ($85.9 billion) in new cash to help reduce the contagion risk. It makes a practical alternative, such as Bitcoin, even more attractive.

Bitcoin currently has a relatively small presence in China. Can you imagine what will happen to its value if it suddenly becomes more popular for the 1.4 billion-plus population of China?

The price of Bitcoin isn’t dependent on GDP or interest rates. It is only dependent on demand. When a war between the USA and Iran seemed likely earlier this year, it appeared that Bitcoin and cryptocurrencies, in general, were behaving like a safe asset haven.

Smart money says that as the Coronavirus grows throughout the world and puts many countries into lockdown, their financial markets will suffer further, and Bitcoin will increasingly be seen as a viable option, and demand will rise again.

Some other upcoming developments mean we should be optimistic about the long-term pricing of Bitcoin. It will be upgraded by what is known as a “soft fork,” which is a change to the currencies protocol. It will improve the scalability and privacy of Bitcoin.

There will also be a new consumer APP that will ease Bitcoin purchases from Bakkt, the Bitcoin futures exchange. They have powerful backers in the form of the coffee chain Starbucks.

All of this leads me to conclude that demand for Bitcoin will rise significantly before the end of the year and continue in the years ahead. The chaos the world is suffering through is a tremendous chance for Bitcoin to advance and become more relevant.

Final Thoughts on Bitcoin and the Coronavirus

Uncertain times often call for extraordinary measures. Nobody knows how far the Coronavirus will go in changing all of our lives.

There are some encouraging signs that new infections may be slowing down in China, but the likelihood is that we are in for some profound long-term changes in how we live.

If the trend is for people to be less social, work from home, and perhaps even become a real cashless society, Bitcoin is well placed to become one of the standard ways of making transactions.

It is already well-known to the general population. Bitcoin has the infrastructure in place to work practically anywhere in the world, and it is now easy to use.

It could all mean that we will see a boom in the price and popularity of Bitcoin. It seems likely that after this period of adjustment, Bitcoin is ideally placed to rise sharply in value.

Could it be that the predictions of people like Chamath Palihapitiya and Wences Casares of Bitcoin reaching a value of $1,000,000 in the future will come true?

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