In recent days, China’s stock plummeted to its biggest loss in three decades. Investors are hoping that this is not a sign of a deep problem.
As a consequence of the effects of the coronavirus in China, panic has been seriously affecting the world’s second largest stock-market lately.
It was reported that the Shanghai Composite Index decreased by 2.8 percent in recent days, thus being the worst end to the Lunar Year known until now.
Chinese Stock Falters
According to financial news media, about 90% of the 4,000 public shares of the Asian continent fell with a trading volume increased by 20% overall. Foreign investors also sold a record USD 1.7 billion in shares and the yuan slightly plummeted, falling by -0.4%.
Nobody had expected the events that occurred, but they have been largely linked to the hysteria around the Wuhan coronavirus. Two Chinese cities have already been quarantined until now as the country struggles to contain the outbreak, which is now spreading to the rest of the planet. However, there are also indications of the existence of other financial issues at stake, besides the hysteria over the disease.
However, it should be noted that the issue is strange since the Chinese New Year is usually a time of a population rebound. Although it is a time of increased consumer expenditure in China, actions associated with basic needs were the most affected as a result of the panic created by the virus. Therefore, it could eventually be one of the most serious tests for President Xi’s government in recent memory.
Bitcoin Falters
Whilst China collapses, the world economy remains on the brink, since the market has shown relatively weak trading in recent days. Bitcoin, which could not be an exception, fell by about -2.5 percent and is currently being traded at around USD 8,450.
Although Bitcoin is often described as being a hedge against global chaos, this has not been supported by historical trends. It has been repeatedly determined that the price of the main cryptocurrency tends to follow the S&P 500. In other words, a healthy stock market means that Bitcoin will see healthy growth in prices.
This is the reason why the panic in the Chinese stock market is so worrisome since it could cause a domino effect that could severely impact worldwide markets. The consequences would be destructive not only to the S&P 500 but also to Bitcoin (BTC).
The eyes of the world are now in China as it seems that it will recover from the losses that it has recently suffered. However, the panic is not likely to subside completely until the Wuhan coronavirus is completely under control.
Throughout its history, different types of events have seriously affected Bitcoin’s prices and hash rate levels. However, the main cryptocurrency has always managed to overcome such negative situations by even reaching all-time highs. Consequently, Bitcoin is still the best investment for those wanting to venture into the world of crypto assets.
By Alexander Salazar
