How will a new coronavirus outbreak affect the cryptocurrency market?

Author: Xiu MU

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Earlier this year, a new coronavirus outbreak in China, industry insiders believe that this will have an impact on the cryptocurrency market.

According to Coindesk, Jason Wu, founder and CEO of the unregulated crypto lender DeFiner, said he cancelled 12 meetings with Chinese crypto customers due to a virus outbreak. Wu said, "We plan to travel to 10 cities to communicate with potential customers in China. But no one wants to attend any meetings because of the virus, and we have to reschedule everything."

According to data from research company Chainalysis, given China's central position in crypto investment, China has the most exchanges in the Asia-Pacific region, and Asia-Pacific exchanges account for 40% of the world's top 50 exchanges.

Wu said that marketing activities are crucial for Chinese cryptocurrency investment companies to raise funds and invest in digital assets, and these activities may be slowed by the virus outbreak. Wu said,

"If money no longer flows into these crypto assets as usual, the market could be hit hard."

Wu also said that in addition to the virus outbreak, the cryptocurrency market could be hit twice as the Chinese New Year approaches. Many Chinese cryptocurrency investors tend to sell cryptocurrency before the holiday to cash out, and enter the market to invest after the year.

San Francisco-based crypto hedge fund Trading Terminal CTO Lingxiao Yang said that although Chinese cryptocurrency investors have considerable market power, it is difficult to find statistically the correlation between virus outbreaks and cryptocurrency market trends. Yang said, "Given that data is not always available and transparent, it is difficult to find out what affects the volume of cryptocurrency transactions and market prices."

In addition, compared to the stock market, the overall market value of cryptocurrencies is small, which means that many factors may have an impact on the market. However, Yang still described some characteristics of cryptocurrency investors in Asia that could make the coronavirus an important factor affecting the market.

He said that most cryptocurrency investors from Asia are often individual investors, and historically, they have become more active around major holidays such as the Chinese New Year. He mentioned, "We cannot predict market prices, but based on our past experience, market prices tend to fluctuate more during this time. Virus outbreaks may lead to more crypto trading by individual investors because of these Investors will have to stay home and they will even have more time to focus on the market. "

Kostya Etus, a senior portfolio manager at money management company CLS Investments, said it is difficult to predict market prices due to the unique dynamics of returns on digital assets like Bitcoin.

Etus said, "Bitcoin is not actually considered a safe-haven asset like gold or cash, and does not have much in common with risky assets such as stocks. Although most assets are specific to a certain risk tolerance environment Yes, it is possible to predict the price response of certain events, but Bitcoin is not such an asset. "

Samuel Lee, financial adviser to Chicago-based SVRN Asset Management, said that because cryptocurrencies are highly speculative, it is conceivable that coronaviruses could have a significant impact on global markets. "Because the crypto market is irrational compared to traditional financial markets, the crypto market may overreact to virus outbreaks," he said.

On the other hand, Lee said a virus outbreak is more likely to have a limited impact. He mentioned, "At the time of possible war between Iran and the United States, we saw Bitcoin rise as an asset class. However, the coronavirus may not have that much geopolitical impact."

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