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BitcoinSpotlight

Stop Associating Bitcoin Price Surge to the Corona Virus

“Whole world must be ready to deal with corona virus”, World Health Organization (WHO) warned and urged countries to make arrangements to detect and treat the sick. The corona virus plague is becoming click-bait for all content creators, so much so that even some of the top tier media outlets published stories, associating bitcoin (btc) recent price surge to the plague.

Associating bitcoin to the epidemic is ridiculously insensitive and nullify the crypto asset’s price determining factors. There are two sides to this claim that I’ll put in front of the audience with facts and figures and some events occurred in the recent past that are necessary to take in.

Corona Virus is Good for Bitcoin.. Really?

Is a statement that we all started to hear a lot recently, so let me first put facts associated to this claim before jumping to the crypto assets price controlling factors. Among some other countries, it is true that China is also considered a ‘crypto hub’ despite bitcoin ban, which means that it is officially illegal to mine or trade in bitcoin within China.

Those who lay claim to this notion believe that as soon as the virus outbreak news came out, many Chinese including wealthy ones bought bitcoin from their liquid asset (cash/stocks) and got out of China, since it is difficult to get out of a country with significant amount of cash or gold.

The first thing anyone would’ve gone through by taking this step is the hassle of buying bitcoin, which for the first timers is not at all easy, given the short period of time in between from mere virus outbreak news to an international emergency.

Bitcoin Not Seen Mass Adoption Yet

The crypto asset still hasn’t seen adoption to the extent that moments of global crisis and geopolitical turmoil affect its price. Bitcoin’s adoption is slow but definitely increasing over time and to back this claim, the total number of crypto wallets has not experienced any spike during the recent crisis, as shown in the graph from an extremely credible source.

bitcoin wallets corona virus

Bitcoin is still not considered as a ‘Safe Haven’ for investors due to its extremely volatile price. One of the leading analyst of the cryptoverse and founder of Quantum Economics, Mati Greespan also believe that bitcoin has some miles to go in terms to be considered as a safe investment asset and said;

“There does seem to be a lingering sensation that bitcoin may be transitioning into a traditional safe haven asset, it doesn’t seem like it’s quite there just yet, but there are clear indications that it’s at least moving in this direction.”

No Relation Between Recent Bitcoin Price Surge to the Epidemic

Now first let us talk about the chain of events leading to the recent bitcoin price surge. Wuhan was placed under quarantine on 23 January 2020. The virus was first detected in the Chinese city of Wuhan in December 2019 and at that time bitcoin price was fluctuating between $7,100 to $8,000, which is normal if we are looking at the crypto market.

Bitcoin is currently trading around $9,400, about the same as it was in November 2019. Since Wuhan outbreak, the asset has gained 10% in value, but it was already expected to reach current levels by leading analysts due to btc’s price affecting factors. But what are bitcoin’s price affecting factors, and in what ways do they affects the crypto asset? Is something everyone should consider first.

Bitcoin Price Affecting Factors

Bitcoin is not issued by a central bank or backed by a government, unlike traditional currencies the monetary policy, inflation and economic growth measurements are very different when it comes to the crypto, since it is decentralized digital currency and is maintained by a network of equally privileged miners.

It is a fact that when bitcoin price soars the rest of cryptocurrencies follow, a trend widely known not just among crypto folks but everyone as Ethereum (ether), ripple (XRP) and the rest experienced considerable gains since the start of the outbreak.

The following factors affects bitcoin’s price and they are;

  • Demand and supply of Bitcoin
  • Cost of mining one Bitcoin
  • Number of competing cryptocurrencies
  • Regulations governing its sale
  • Exchanges it trades on
  • Media influence

There will only be 21 million bitcoin, a fact that is known since the inception of the crypto. Every year, new coins are being released at a slower rate, which means that the growth rate has decreased from 9.8% (2015), to 6.9% (2016), to 4.3% (2017). Since bitcoin supply is getting reduced and there is an increase in its demand, the value of bitcoin is widely considered to increase.

Bitcoin mining involves a complicated procedure of solving cryptographic math problems that all btc miners compete to solve in order to get reward in btc. When more miners join competition of solving the problem first, the problem gets more difficult and thus more expensive. By expensive it means that will require more powerful hardware which is costly in the first place and consumes more electricity.

Bitcoin’s hash rate is the number of guesses a miner can make at a cryptographic hash every second. If a system correctly guess the hash of a block a mining unit adds that block to the blockchain and the miner receives a reward for their work. This include both, the transaction fee and a fixed amount of new bitcoin unlocked with every block.

bitcoin hashrate corona virus

On 30th January, bitcoin’s hash rate hit new all-time high and the collective computing power supporting the network stood at more than 123,011,832 terahashes per second, as can be seen from the graph. This is one of the fundamental affecting bitcoin’s price.

Bitcoin operates on a different plane , unlike traditional stocks and have different fundamentals and factors that affect its price. Bitcoin’s price remains extremely volatile, the very reason it hasn’t seen much institutional investment nor mass adoption to the extent that moments of global crisis and geopolitical turmoil affect its price.

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Hassaan Malik

Co-founder of BlockPublisher, Hassaan is a technologist at heart with a keen interest in blockchain. Email: hassaan@blockpublisher.com

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