‘Not Out of the Woods Just Yet’ Caution Experts with COVID-19
Source: StockCharts BTCUSD Pricing February 20, 2020
The recent momentum driving BTC prices in 2020 seems to have slowed somewhat over the past several trading sessions. This is indicated by successive red candlesticks reflecting a downturn in Bitcoin demand. 2020 heralded a new dawn for Bitcoin, as wave after wave of bullish sentiment continues to propel the world’s premier cryptocurrency to new short-term highs. Bitcoin’s dramatic gains for the year to date are notable. From under $7,000 per unit BTC, it broached the $10,000 barrier, before retreating to its current levels around $9,583 – as indicated on the chart above. What impresses about Bitcoin, among others, is the fact that it is extremely volatile – allowing for substantial price movements to the upside or downside. From a trading perspective, this volatility is sacrosanct. Without excessive price swings about the mean, shorting or going long with Bitcoin trading is less profitable.
Among the drivers of BTC appreciation in recent weeks is growing concern about the rampant spread of coronavirus a.k.a. COVID-19. As news of infections, mortality rates, and growing international concerns increase, so Bitcoin prices rise accordingly. Experts routinely compare BTC to gold in this regard; it serves as a hedge against geopolitical uncertainty, global crises (such as coronavirus), and market volatility. In fact, a CEO of a prominent trading enterprise recently claimed in an op-ed that If the Virus Goes, Crypto Trading Could Go. This reinforces a school of thought that Bitcoin is a hedge against volatility. The current trend for January and February 2020 is bullish, with short-term bearish sentiment heading into March. However, the Bollinger Bands indicate that the upper band of $10,529.34 and the lower band of $9106.85 are well above the 50-day moving average and the 200-day moving average. This is confirmation of Bitcoin’s bullishness this year.
Experts Advise Caution About Growth of Covid-19
While China is doing the best it can to contain the spread of coronavirus, fears are starting to grow about the devastating impact this virus will have on developing countries across Africa, and Latin America. Foremost among the countries most at risk are those with devastated economies, widespread corruption, and poor health services. Countries like Congo, Uganda, Ghana, Sudan, Eritrea, Somalia, and the like are extremely vulnerable to outbreaks of contagious viruses. As reported by the Economist, 99% of all confirmed COVID-19 cases have been in China, with a striking number of new infections found on the cruise ship – the Diamond Princess. While China’s crackdown on the virus has certainly slowed its spread, there are real and growing concerns that it could break out and become uncontainable.
A study commissioned by emerging microbes & infections by Chinese students revealed that there is evidence of transmission of COVID-19 with the oral/fecal route. Generally, the transmission is via respiratory, fecal, oral, and bodily fluid secretion channels. The first confirmed case was a Vietnamese lady who lived in the city of Wuhan, in China for a period of 2 months between December and January 2019/2020. She lived with two Vietnamese roommates in the city, and did not report visiting the local seafood market, or being in contact with anyone with flu symptoms. The New York Times reported that the number of infections in China is now at 74,576+, with a total death toll of 2118+. That translates into a mortality rate of 2.84%. These statistics, troubling though they may be, are also helping to drive a concerted effort by the World Health Organisation, the Centers for Disease Control, and other national healthcare agencies to isolate, contain, and provide relief for those infected with the virus.
From an economics investment, the virus has led to a sharp slowdown in productivity across China as cities have been brought to their knees as fears of the outbreak grow. With productivity numbers down, demand for energy is down, and this is impacting financial markets from Wall Street to Beijing, Shanghai, and Tokyo. Reduced global demand naturally lends itself to decreased production and economic malaise. Many people in China are turning to alternative investments to shore up the values of their portfolios. One such option is Bitcoin. As long as people are scared, they will likely continue to seek contrarian investment options. A slowdown in infection rates will reverse this trend, but the Bitcoin halving in May 2020 is probably a bigger driver of market sentiment moving forward.
Image by Arek Socha from Pixabay
