Professionals are concerned that the coronavirus may disrupt the flow of business. Analysts believe that the virus could lead to a boom in the retail trade of cryptocurrencies.
Jason Wu, CEO and Founder of non-custodial crypto lender DeFiner, had to cancel dozens of meetings with its cryptocurrency customers in China after the onset of the coronavirus epidemic in January. The executive said that he had planned a tour to visit ten cities in the country, but nobody seemed to want to attend any meetings on cryptocurrencies or other subjects due to the virus.
Given its status as a cryptocurrency investment center, China has the largest number of exchanges in the Asia-Pacific region, which has 40% of the top 50 exchanges worldwide according to the research company Chainalysis. Professionals like Wu are worried about the possible disruption of business due to the coronavirus and the impact it can have on prices.
According to Wu, the cryptocurrency market could get hit a second time on the occasion of the Chinese New Year, since many Chinese cryptocurrency providers tend to charge in cryptocurrencies just before the festivities and reinvest in the market in the next year. As the outbreak of the virus occurred right at the end of the cycle, there is no certainty of how much money will return to the market after the festivities, or at which point.
Coronavirus Obscures Market Landscape
Cryptocurrency investors are a considerable force in the market, but it is statistically difficult to conclude a correlation between the outbreak of the coronavirus and the movements in the cryptocurrency market, said Lingxiao Yang, chief technology officer at Trade Terminal, a San Francisco-based investment fund.
Yang indicated some characteristics of China’s cryptocurrency market investors that could make coronavirus an influential factor on the market. Most investors in Asia are usually retail investors and, historically, they become more active around big festivities such as the Chinese New Year, said Yang.
It is also difficult to predict the market price since digital assets such as Bitcoin have a unique set of return controllers, said Kostya Etus, a wallet manager at the investment management company CLS Investments.
According to Etus, Bitcoin is not seen as a valuable security asset such as gold or cash and does not have much in common with risk assets such as stocks. Most assets are specifically from risk or risk-free environments, where price reactions can be predicted for certain events, but Bitcoin does not belong to this group of assets.
Fluid Situation in Financial Markets
Since the cryptocurrency market is highly speculative, the coronavirus could have a significant impact on the world market, according to Samuel Lee, a financial advisor at the Chicago-based company SVRN Asset Management.
Lee said that the outbreak of the coronavirus is more likely to have a limited effect since it has already been seen how Bitcoin rose at the same time that the possibility of a war between Iran and the United States presented itself. However, the advisor believes that the coronavirus may not have that high level of geopolitical influence.
The Standard & Poor 500 index closed positive even after the WHO convened an emergency meeting on how to attack the outbreak of the coronavirus. However, the reference of the Hang Seng index from Hong Kong and the A-share index from Shanghai has experienced significant declines recently.
By Alexander Salazar