How Coronavirus Outbreak Will Affect Mining in China And Bitcoin Industry
The Coronavirus (COVID-19) is moving steadily around the planet, spreading to new countries. It has a negative impact on the world economy.
The main mining capacity is still concentrated in China, where the outbreak of COVID-19 began in late December 2019. Due to the epidemic, serious problems have begun in various industrial sectors – logistics and supply chains have been disrupted, and export and import operations are complicated. At the same time, business activity in the areas of catering, tourism, retail sales, as well as the manufacturing industry is falling.
Many businesses are threatened with bankruptcy due to insufficient cash flow, depleting reserves, difficulties with lending and debt restructuring. Some companies, including mining companies, are at risk of closure.
Many in the crypto community have a reasonable question: how will all this affect the industry and the global economy as a whole? The answer can be found in our article.
The impact of coronavirus on the crypto market and the mining industry
Dramatic events are also unfolding in the Chinese mining industry. Thus, in January, the top management of Canaan left the country. Due to the quarantine of local offices and factories, all manufacturers of ASIC-miners shifted their shipment terms.
“Domestic logistics in the country is almost completely paralyzed, priorities are given to strategic cargoes to combat the virus and food products. As going to work is forbidden and the police check it strictly, the delivery and installation of new ASICs are almost impossible. Obviously, Bitcoin is unlikely to double in size in the run-up to halving, so any slowdown in commissioning new equipment will help the industry stay in a profitable zone. Even such a terrible and dramatic event as the coronavirus epidemic can contain a bit of positive” – Zodd Zverev CTO of mining pool 1Thash&58COIN.
Sergey Arrestov, the co-founder of BitCluster, is confident that after a likely decline in complexity, Bitcoin production will become more profitable for firms outside China. This will have a positive impact on the decentralization of the network of the first cryptocurrency.
Hipo Young, CEO, and founder of CoinEx CryptoBirch said that his company’s business activity decreased significantly due to the epidemic. In particular, he had to cancel participation in international conferences and some of his employees work from home.
“Nevertheless, the company’s operating activity is stable. We have maintained sufficient cash flow from the last bull market. Now the main processes are streamlined, there are no plans for dismissal,” said Yang.
Many companies around the world have already developed plans in case the coronavirus epidemic worsens. The most pessimistic scenario of the American Coinbase assumes the full transfer of employees to remote work. But anyway it is still possible to exchange your bitcoin to PayPal USD.
As for the price of Bitcoin, the crypto community has a wide range of opinions. Some believe that the injection of liquidity by the central bank and quarantine measures in relation to banknotes is a positive signal for BTC, which has no material embodiment.
Coronavirus is spreading rapidly around the world, shocking markets. It is possible that the epidemic will not only slow down the growth rate of the world economy but also bring closer the beginning of a new global economic crisis. In a panic, even the top stocks are being dropped, investors are fleeing into protective assets – gold and American government bonds, as well as increasing positions in the fiat currency.
If in the past the correlation of bitcoin with gold was mainly positive and with the stock market – negative, in early 2020 everything changed dramatically. As the virus spreads, the first cryptocurrency is falling along with stocks, while gold continues to grow and has already reached the mark of 2013.
Thus, it is already difficult to give an unambiguous answer to whether Bitcoin is a protective asset during global turmoil. We can only say with certainty that BTC has a weak correlation with the traditional market as a whole and is, therefore, suitable for diversifying its investment portfolio.