Why coronavirus fears are sending cryptocurrency soaring

NEW DELHI: The novel coronavirus outbreak in China, now officially designated Covid-19, has disrupted lives across the world. Not only has the virus spread rapidly, infecting thousands, it also appears to be affecting the global economy. While the Chinese stock markets have tumbled, some investors are turning to gold and even bitcoin as safe havens.
BITCOIN SURGES AS VIRUS HITS GLOBAL ECONOMY

After a tumultuous few years that saw the value of bitcoin soar to $20,089 before crashing, the cryptocurrency has appeared to stabilise.But this month, price of one bitcoin crossed $10,000 for the first time since October 2019 in what appears to be a reaction
to the potential economic impact of the Wuhan coronavirus outbreak.

The cryptocurrency has spiked about 30% since the turn of the year. Bitcoin has become something of a safe haven at a time of global political and economic instability — the US-China trade war, Brexit, and now the virus. Though the virus is considered a factor in the bitcoin surge, another cause is likely the expected bitcoin “halving event” in May, which will see the number of
bitcoins available cut by half.
The last halving event in 2016 saw bitcoin prices double to a record high in 2017. However, the outbreak has had some downside for bitcoin. Several cryptocurrency related conferences, which are designed to woo investors, have been cancelled across Asia.
Server farms that help verify transactions have had to close and shipment of equipment has been delayed as a result of the outbreak.
Much of the damage is concentrated in Asia-Pacific — the region is home to 20 of the world’s top 50 crypto exchanges and the source of 40% of bitcoin transaction in the first half of 2019. Five crypto mining farms in China alone control about half of the
global computing power behind the bitcoin network.
SAFE-HAVEN ASSET GOLD DRAWING MORE INVESTORS

Like bitcoin, many investors have turned to gold in times of uncertainty. Globally, gold has seen a surge in recent weeks and
reached a seven-year high. Experts say investors aren’t confident about stock markets and are thus turning to safe-have assets like gold, which are more insulated to external shocks. With investors unsure how much longer the outbreak could continue and its impact on the global economy, they appear to feel much more comfortable parking their money in gold.
SHANGHAI STOCK EXCHANGE FELL 300 POINTS BEFORE RECOVERING

Chinese stock markets reacted negatively to the coronavirus outbreak when they reopened after the Lunar New Year holiday. Manufacturing, materials, and consumer goods companies were among the hardest hit, while health care shares soared. The fall came despite China’s central bank announcing new measures to ease the impact of the outbreak. The People’s Bank of China unexpectedly lowered short term interest rates as part of its attempts to relieve pressure on the economy.
Experts say the virus could harm global economic growth if it lasts for a prolonged period. Already, major Chinese cities are on full or partial lockdown, the tourism sector has virtually ground to a halt, and factories and companies have been forced to stop or limit operations to help contain the virus.
Source: Media reports