With the outbreak of the coronavirus, its impact on the global economy is becoming more and more apparent. Below, we list three possible positive effects of COVID-19 on the world of bitcoin.
Bitcoin continues its breakout
Against the global uncertainty, Bitcoin is still proving its worth as a macro hedge. BTC has achieved almost 35% improvement and was able to hit $10,000 in 2020.
To many, this is clear evidence that Bitcoin’s status as a risk-free asset is solid. The idea is that as a result of the Coronavirus novel, as China’s economy weakens, Chinese investors have entered bitcoin to use its safe haven story.
On February 3, China’s leading stock index – the CSI 300 – dipped 9% in what was dubbed the worst opening in a decade. To add salt to the wound, the Shanghai Composite Index went down by 8%.
The Chinese stock returned quickly. An attempt to bolster the economy worked, with the Chinese government reducing interest rates to boost the system. In the meantime, Bitcoin has continued to hold about $ 10,000.
Can Bitcoin Fix Infected Cash?
As the official death toll with the coronavirus epidemic increases, China is stepping up its resistance.
China’s latest method of preventing the spread of coronavirus involves cash eradication.
China has begun the use of ultraviolet light or high temperatures to disinfect fiat currency notes, a central bank press conference said. The prevention strategy involves separating the notes for up to two weeks before redistribution.
Prior to the recent New Year’s celebration, China’s central bank has issued an “emergency” of four billion yuan notes particularly for Hubei – the epicentre of the viral pandemic.
For the crypto community, it provides an even more positive narrative of why cryptocurrencies like Bitcoin are so badly needed.
Cryptocurrencies like Bitcoin can help to curb the spread of the coronavirus. Without the exchange of physical money, the probability of infection decreases significantly.
But by spreading the bubble, we can say that the use of Bitcoin in China is not enough to justify any replacement. Therefore it may not be a viable replacement for cash. But, on the other hand, cryptocurrencies have already gained a lot of momentum in Europe and America. Thus, they can easily be a viable replacement if both the government and the general public are co-ordinated.
The reduction in BTC mining difficulty
One of the primary positives of the COVID-19 effect on bitcoin is the reduction in mining difficulty.
Chinese authorities have shut down a huge number of miners for COVID-19 containment. The founder of the Bitcoin Mining Pool, Jiang Zhuoer, had announced that the police had forced the mining company to shut down.
Thanks to the use of inexpensive resources and electricity, China dominates almost 65% of bitcoin mining. The loss of mining companies represents the crypto community with a double-edged sword. On the one hand, the centralization of bitcoin mining can be reduced, further supporting the industry’s ideals. On the other hand, the health of the network can be negatively impacted by the absence of mine workers.
China’s bid is seemingly linked to a decline in mining difficulty. On February 11, Bitcoin Network adjusted just 0.52% per data obtained from BTC.com. This comes in complete contrast to the January compatibility, which saw the network’s overall capacity increase by 11.75%.
This transparent increase could make it easier to mine Bitcoin, which retail workers – who are otherwise priced out to do so can get their slice of the action.
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