3 Ways How Coronavirus Affects Bitcoin

Ivan Skladchikov
February 27, 2020
3 ways how coronavirus affects Bitcoin article featured image

These days, both coronavirus and Bitcoin are getting stronger and attract a lot of attention. These two facts seem to have nothing in common at first sight. But if you dig deeper, you can spot at least 3 ways how coronavirus affects Bitcoin. 

Coronavirus: Recent reports

Coronavirus has been all over the news recently, and for a reason. By now, 28 countries are affected, with over 1,500 cases of the virus confirmed outside China. This country, where the coronavirus originated, has the highest death toll (2,442 deaths per 76,936 cases). The number grew dramatically when the authorities changed their method of diagnosing the disease.

Apart from the general panic this news spreads, it makes investors worried about the potential economic outcome. They are afraid that the epidemic will negatively influence the market of China, the world’s leading manufacturer of goods and materials. 

The number of registered cases of coronavirus is growing.
Coronavirus: the number of registered cases is growing. Image source: Wikipedia.

Bitcoin: Position In the market

Meanwhile, Bitcoin has been strengthening, too. In the first weeks of this year, ‘the king of cryptocurrencies’ added 30% to its value. This impressive growth may be partly due to the coronavirus epidemic spread. At the time of writing the price of BTC is $9,636. The next barrier to break is $10,000.

How Coronavirus Affects Bitcoin

There are experts who are sure that the coronavirus spread and the upward trajectory of BTC are connected. One of these experts is Nigel Green, Chief Executive of deVere consulting group. According to him, the price of BTC will keep rising until the coronavirus reaches its peak.

Therefore, it’s not just a weird coincidence. While traditional markets suffer hard times, the innovative financial tool is getting stronger and gain popularity.

Currently, the coronavirus affects Bitcoin in three obvious ways.

  • It makes the price of BTC grow;
  • There are problems for mining pools and mining hardware manufacturers;
  • People start seeing the benefits of digital money that do not change hands, physically. Thus, its moving around does not spread the disease.

Each of these effects is worth a closer look. 

Bitcoin price chart shows that BTC price has grown during the last two months.
Bitcoin price chart showing impressive price growth during the last 2 months.
Image source: Coinmarketcap

1. Bitcoin Price Is Growing

The recent growth of BTC price is a natural result of increased demand for this cryptocurrency. The main reason for this growing interest is that investors consider BTC ‘a safe-haven asset’. They believe Bitcoin will keep their funds stable and secure during the turbulent times. Therefore, they start buying it.

In this case, ‘the digital gold’ acts as real gold or another precious metal. When a disaster hits, you always look for a good way to store your values. Cryptocurrency gets more popular as more people recognize its advantages and start relying on it during a crisis. Especially in China, the center of the epidemic. 

China controls 80% of the world's mining power.
China used to control most of the world’s crypto mining power, making the community worried. Image source: IHODL

2. Mining Pools Are Closing In China

Another way how coronavirus affects Bitcoin relates to mining.
In the infected areas, many companies are losing money because the local authorities demand people ‘to stay where they are’ and restrict their activities.

It negatively affects mining facilities, too. The owner of a big mining farm called BTC.top complains that police officials interrupted his operations and shut down the machines. Naturally, they do it to prevent the coronavirus from spreading further. But it’s not a comforting thought for those who lose profits.

Mining hardware manufacturers suffer from the coronavirus situation as well. They have to delay the delivery of their machines due to the quarantine measures. It all has a negative impact on the production and marketing of goods.

As you probably know, China is home to the biggest mining pools and mining hardware manufacturers. Due to cheap electricity and an abundance of other resources, this country has been the leader of the sector. It used to control about 80% of the total BTC mining power.  This fact made many crypto users afraid that China would centralize the mining resources in one place. Potentially, it means getting control over the BTC network.

The coronavirus has two side-effects on this situation. On one hand, it makes Bitcoin mining more decentralized, according to Satoshi Nakamoto’s original idea. On the other hand, it endangers the network which depends on miners for its smooth operation.

Theoretically, if some big players leave the field, it could make BTC mining cheaper. Right now, it’s extremely hard to mine BTC outside a pool. The barrier to entry is too high because of intense competition and high hardware costs.

A Chinese official cleans banknotes to prevent the virus from spreading during the coronavirus outbreak.

China cleans banknotes to prevent the virus from spreading.
Image source: The Economic Times

3. Bitcoin Is helping To Avoid Infected Cash

Every kid knows that money is one of the dirtiest things on earth. You have to wash your hands after you touched coins or banknotes: they change many hands and are covered with bacteria. That is why fast-food chains do not let the person at the cash register deal with food.

This advice is especially important in times of coronavirus. Paper money becomes an infection carrier. 

One of the methods to curb the disease in China was to clean cash using UV radiation and high temperatures. Also, the authorities were holding banknotes in quarantine for 7 – 14 days before putting them back to circulation. If money comes for hospitals or farmers’ markets, it undergoes a special treatment and stays in the bank. Naturally, these measures slow down the economy, though many people in China are comfortable with online payments.

To counteract their effects, the Chinese government had to start a printing press and issue brand-new notes worth 600 bln yuan (around $85,5 bln). Four billion of them went to the province Hubei, the coronavirus epicenter.

All these problems open people’s eyes to the benefits of BTC and digital currencies in general. When money has no material representation, there is no way for it to spread disease. Apart from the coronavirus, there are many other infections that can be distributed through hand contact.

Also, cryptocurrency is easy and fast to transfer to any area, no matter if it’s infected or disease-free. You don’t have to print new money to replace contaminated notes. And you don’t have to waste time, funds and effort to clear them from bacteria or destroy them. 

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