Bitcoin benefits as coronavirus hits Chinese economy

Shanghai exchange floors fall silent as extended new year break and deadly virus combine to hit China's stock markets while investors turn to cryptocurrency

A stock market slump in China is being countered by massive investment into Bitcoin, say market analysts.

Nervous investors, panicked by the coronavirus outbreak and an extended trading floor break in Shanghai for the new year, are holding back over fears for China’s manufacturing output and exports.

However, according to a Coin Rivet article for the Daily Express, moves to pile investments into Bitcoin appear to be picking up pace with a swathe of large fund movements into cryptocurrency over the last three days.

Bitcoin spiked to a new high for 2020, briefly crossing $9,600 as China’s stock markets buzzed back into life on Monday morning with obvious signs of manufacturing and consumer goods being hit hard.

The forecast for physical goods trading in and out of China looks severely weak for the next few months as health officials in Beijing fight to contain an outbreak that has a current death toll of more than 425. Confirmed infections have also surpassed 20,000.

Just as with the SARS outbreak from November 2002 and July 2003, the coronavirus has given China’s economic outlook a depressed tone. Eighteen years ago, stock markets in China and Hong Kong took a huge hit as SARS hit the headlines in a similar way to the latest virus.

Once scientists had SARS under control, the markets soon returned to their natural levels.

Two aspects of the current trading narrative, though, may yet dictate a different outcome this time around.

Firstly, China and the World Health Organisation (WHO) were quickly able to respond to SARS in 2002 and contain its spread in enough time to ease the fears of fund managers.

Secondly, digital assets simply didn’t exist. Bitcoin wasn’t invented until 2009, and certainly didn’t even register on the radar of most traders until 2017.

Now, however, scientists seem unable to restrain the advance of coronavirus – and this can only mean further panic will begin seeping into China’s markets the longer it goes on without being reined in.

Add that to the fact that fund managers are now warming to cryptocurrencies, and it looks likely that Chinese money will slowly but surely make a potentially massive difference to the shape of bitcoin’s value as the effects of a health crisis take hold.

According to Nigel Green – CEO of international finance specialists deVere Group – bitcoin stands to gain huge ground over fiat money during virus outbreaks.

“The ongoing upward trajectory of the price of bitcoin correlates to the spread of the coronavirus,” he said.

“The more individual cases that are identified, the more countries around the world that are affected, and the greater the impact on traditional financial markets, the higher the price of bitcoin has jumped.”

His view was backed up by Chicago-based analyst JH Winterburn who believes bitcoin possibly looks on track to push above the psychological barrier of $10,000.

“The reaction of the Chinese market goes way beyond what was expected when trading returned after the Lunar break,” he said.

“A serious and localised health scare almost exclusive to one country will always have a potentially devastating effect on that country’s materials economy – history has told us that many times.

“We can see several large buy-ins on BTC this last few days have come from China, so it is obvious what is happening, but we’re also seeing a fragility in the crypto market too that is perhaps being propped up by this activity.

“We must keep in mind that bitcoin was beginning to build towards a bullish outlook weeks before the world began taking coronavirus seriously – and that makes placing all your chips on BTC repeating the highs of 2017 a risky gamble.”

Despite the boost to Bitcoin’s value over the last few days, the cryptocurrency suffered a drop of almost six per cent from yesterday’s high. BTC is currently trading at around $9,120.


Read the latest Coin Rivet analysis on Bitcoin here…


Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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