Coronavirus has now spread to various parts of the world. This pandemic is very troublesome for the people because it can reduce the economies of various countries. Thus, many people’s needs are rising prices.
This news succeeded in making Bitcoin and the stock market fall by a full 1%. Then, it has dropped 6% on Chinese New Year or Chinese New Year due to uncertainty surrounding the spread of the coronavirus.
Besides, the coronavirus outbreak which is getting worse and spreading to various countries also affects the business climate. Chinese and US trade which should be high when Chinese New Year celebrations are forced to be hampered because of limited travel.
According to New York Times, the Chinese economy is also feeling the effects of this virus, many food stocks have run out, food outlets, supermarkets also have to close. Besides, US companies that opened branches there such as McDonald’s and Disney temporarily closed their businesses.
Effects of Coronavirus on Stocks and Bitcoin
The fall in shares is somewhat different from the losses in Bitcoin. The Bitcoin rally has brought assets close to $ 9,000. This amount is far from the highest price of all time. While the pullback is relatively large, it seems that this will make Bitcoin fall to its previous level.
On the other hand, the pullback is likely to be more related to gross overvaluation than to a virus. According to analysts, the market has seen an unrealistic euphoria in recent days, and a decline is expected.
Stocks are somewhat down due to excessive news and valuation, the possibility of Bitcoin can take short-term profits from it. Even if the market remains relatively stable with small losses, investors will likely start to take profits by finding a place to move profits. Then investors can see and choose Bitcoin as a hedge.
The coronavirus also causes fragility in international finance, Bitcoin’s ability to move across international borders can easily provide the type of financial mechanism needed during this crisis.
Bitcoin and Coronavirus: Strange Correlations
When global equities fell against fears of the Coronavirus outbreak, investors did not see what was called safe-havens as hedges.
For example gold, the asset still recorded an increase of 0.12 percent. However, the spot rate of the yellow metal fell 3.36 percent from its local peak. Maybe gold will end its winning streak due to favorable economic data and the strengthening of the US dollar.
Bitcoin which previously proved to be a safe-haven asset during the US-Iran conflict. So far it has not been able to prove anymore as a safe asset, because investors remain fixated on the risk-on market.
This step can increase investor appetite for choosing safe assets such as gold, and it can help people start speculating and seeing Bitcoin.
Read more: How to Use Divergence in Trading?
