Although weeks of quarantining to fight the coronavirus have passed, it may seem as though time is moving extremely slowly: the times before quarantine at the beginning of March (in most of the world), just over a month ago, seem as though they happened in a distant past.
The time and space that the coronavirus has taken in our everyday lives also seem to have changed the cultural center of gravity around the globe–no matter what has been happening in just about any country, the coronavirus has completely taken over the conversation.
The Most Diverse Audience to Date at FMLS 2020 – Where Finance Meets Innovation
This is also true in the Bitcoin community. Bitcoin, like the rest of the world, has been deeply affected by the spread of the coronavirus.
Before the coronavirus economic crash, and the steady recovery that has ensued, Bitcoin was in the midst of a bull market that was being largely attributed to the upcoming ‘halvening’ or ‘halving,’ an event in which Bitcoin’s mining reward is cut in half; this halving is expected to happen on May 11th, 35 days from press time.
Look lively, the #Bitcoin block halving is coming!
Just over 33 days to go.
Less than 5,000 blocks.
Will you be #HODLing?
— Binance (@binance) April 8, 2020
“The recent price drop in BTC caused smaller mining farms that have more expensive power and machine costs to unplug,” he said. “Although the bigger mining farms have seen smaller profits after the recent price crash, they’re still running profitably.”
Though it may not seem like much, at least one miner has already shut down because of the halving–Chinese Bitcoin mining pool BytePool announced this week that it would be shutting down its operations because of concerns around the upcoming halving.
The problem could be especially acute because of the fact that a number of miners–particularly in China–have already been forced to either temporarily or permanently shut down their operations.
Changing the way that we think about Bitcoin
The events around the coronavirus have also revealed some other weak spots in commonly-held beliefs about how Bitcoin behaves in relation to other financial markets, particularly during times of economic crisis.
Indeed, Matthew Dibb explained that “with traditional markets tumbling, alternative assets have not escaped the panic caused by COVID-19…previously lauded as “digital gold,” bitcoin and other cryptocurrencies have similarly not been spared the vicious downward trend resulting from the coronavirus pandemic.”
Still, Dibb believes that “while digital assets have been heavily impacted by current market turmoil, this does not undermine their status as an uncorrelated asset or their potential to offer significant security and potential rewards to investors.”
Indeed, “Bitcoin’s sudden correlation with traditional markets should not be seen as refuting its status as a promising safe-haven investment,” he continued.
Instead, Dibb believes that “the most reasonable explanation for the current market situation is that the global spread of COVID-19 is a textbook ‘black swan’ event — an unforeseen occurrence that has a profound impact on markets, often causing them to behave in unprecedented and unpredictable ways.”
“These moments, however, do not rewrite the market characteristics that define the economy in normal times, and bitcoin’s correlation with the traditional market cannot be taken as a new status quo.”
Dibb believes that “taking a long-term view of bitcoin’s relationship with traditional markets unveils a track record of insularity from global economic fluctuations. Already, a decoupling between bitcoin and more traditional asset classes is visible in the market. Having printed a low of $3,800 only two weeks ago, bitcoin has since rallied about 92% to settle at $7,300 as of today.”
“From a macro point of view, bitcoin has gradually shifted away from its ‘risk-on/risk-off’ relationship with global equities, instead, following similar intraday movements to gold as investors seek safe-haven exposure to hedge their portfolio holdings.”
What are your thoughts about how coronavirus and the halving will continue to affect the price of Bitcoin? Let us know in the comments below.