HomeCryptoBitcoinChina and Coronavirus: why Bitcoin failed during the crisis

China and Coronavirus: why Bitcoin failed during the crisis

In addition to the very obvious health crisis, which will require all the strength of the medical field in each country starting with China, and which will most likely hamper many plans for the future given the uncertainty in many ways, the speed of the Coronavirus outbreak is what caused crises and panic also in the Bitcoin market, showing that most systems in the world were not in fact ready for such an epidemic. 

The thing about such massive outbreaks is that it never affects just one industry, it is always a chain of events that in the end consumes the entire spectrum of businesses. 

How Coronavirus affected the financial world and Bitcoin too

Just like it did with the healthcare system, COVID-19 also consumed the entire financial system, leaving the stock market in shambles and many currencies in their worst state in decades. 

It was expected that, just like regular currencies, cryptocurrencies would also take the hit, but the scale of this crash would have been hard to anticipate.

Bitcoin has had a very good year so far, even though we were only two months in when the outbreak started, reaching other parts of the world at a rapid pace.

Bitcoin was trading at around $9,000 with the bullish market, experts anticipating that the crypto would reach the golden $10k mark in a matter of weeks. Clearly, this was not the case as the outbreak completely shattered the entire ecosystem across the financial field and ruined every plan any trader had this year. And while it is true that those working with top online trading brokers probably did manage to get away with selling their assets and have come out on top from the entire situation, for the majority of people who don’t know the trading world all that well this has proven to be a nightmare. 

While we all know that trading, in general, can be tricky and unpredictable, this outbreak topped all expectations and made a huge dent in the markets.

The reason why this outbreak has affected the financial world so much is that, in the beginning, there was an overload of patients, with hospitals filling up with sick people. Then there was the universal panic, locking people inside and making 80% of businesses close down, turning to online delivery services, which is a big hit for any business used to conduct their day-to-day activities through their establishments. 

But now only very few businesses are still open, people are only buying essentials. All the activities, sports events, majors concerts, and all other gatherings have been canceled. The whole world seems to be frozen and of course, it is affecting the financial world: fiat currencies and also cryptocurrencies. 

Why the cryptocurrencies took the hit

But there is a reason why bitcoin took such a drastic hit when in theory it should have been more resilient, given that blockchain payments should, in fact, be more in demand right now. The reason is that China has been in lockdown for over two months now. And if you know anything about the crypto industry, you know that the majority of the miners are actually operating from China. Since the lockdown was implemented, miners were unable to monitor and make transactions, hence dropping the bitcoin price drastically. 

It is impossible to keep day to day operations as per usual when the nationwide lockdown is keeping everyone in their homes, making communication that much harder. Conducting their daily operation was often extremely hard, if not impossible.

In addition to that, the outbreak slowed down the upgrading procedures that were due in February and March. The lockdown also interrupted product development, logistics and many other aspects of the crypto industry. While the health of many was compromised and an overall panic took over the whole country, it’s not surprising that bitcoin also took the hit, since so many miners’ operations are based in China and were probably interrupted multiple times by their environment, health concerns and an overall panic in the world due to the outbreak. 

This is understandable and luckily the trading has now gone to somewhat of a normal state but even now, bitcoin has dropped to $6,600 – $7,000, leaving crypto users wondering how the cryptocurrency dropped so fast in the last 2 month and how long could this outbreak keep messing with the crypto world.

When will we return to normal?

This is not to downplay the importance of healthcare, and the tragedies happening around the world, with doctors being unable to offer their services to people. But the financial aspect of it is also extremely important and actually could do just as much damage as the health threats have done so far. We’re already seeing the results of some of those financial mistakes and some inevitable losses that usually follow events like these. 

The stock market hasn’t behaved like this since the 2008 world financial crisis and the cryptocurrencies nearly halved in price over the course of just two weeks. The matter of fact is that it is impossible to keep things running as usual, unless you are one of the companies operating online and delivering some of the most essential services. We don’t know how long this outbreak will last, but what is even worse is that we cannot yet begin to comprehend the economic damages made to the country because of this outbreak. It will be months and possibly over a year until life goes back to normal for most people. 

Until there is a vaccine ready, no real change can be expected. This is why all the businesses and trading platforms need to try and adapt to these times, encouraging more action from their users

Giorgi Mikhelidze
Giorgi Mikhelidze
Giorgi is a Georgia software developer with two years of experience trading on the financial markets. He is now working to spread the knowledge about the Blockchain in his country and share all of his findings and research to as many crypto enthusiasts as possible.