{"id":8375,"date":"2020-03-10T02:53:08","date_gmt":"2020-03-10T00:53:08","guid":{"rendered":"https:\/\/forklog.media\/?p=8375"},"modified":"2020-03-09T22:59:20","modified_gmt":"2020-03-09T20:59:20","slug":"how-covid-19-coronavirus-affects-worlds-economy-and-bitcoin-industry","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/how-covid-19-coronavirus-affects-worlds-economy-and-bitcoin-industry\/","title":{"rendered":"How COVID-19 Coronavirus Affects World\u2019s Economy and Bitcoin-Industry"},"content":{"rendered":"

As the virus spreads across countries, the world\u2019s economies feel the negative impact. In December 2019, when the COVID-19 outbreak took on, two-thirds of the total Bitcoin mining capacity was localized<\/a> in China, the patient zero country. The virus harmed many sectors of China\u2019s industry, disrupted logistics, and made export and import operations significantly more complicated.<\/p>\n

<\/p>\n

Many businesses are on the brink of bankruptcy because of insufficient cash flow, low reserves, and complications with loans and debt restructuring. Some companies, including miners<\/a>, may not survive the crisis.<\/p>\n

We\u2019ve gathered the data and expert opinions to figure out how the COVID-19 epidemic impacts traditional markets and the crypto-industry.<\/p>\n

Economic Consequences of COVID-19<\/h2>\n

Back in January, experts were suggesting that the new virus can harm the Chinese economy similarly to the bird flu of 2003 when the epidemic hit the most developed regions of China. These regions together contributed about 15% of the country\u2019s GDP.<\/p>\n

Since then, China\u2019s role in the world\u2019s economy has become more significant. With GDP of $1.66 trillion in 2013 and $14 trillion in 2018, now the country is responsible for almost a quarter<\/a> of the world\u2019s total GDP. Moreover, the virus is quickly spreading to other developed countries, causing turbulence in the financial markets.<\/p>\n

\"China\u2019s<\/p>\n

China\u2019s GDP chart between 2003 and 2018. Source: <\/i>The World Bank<\/i><\/a><\/p>\n

On February 25th, CNBC reported<\/a> that the U.S. stock market lost $1.7 trillion in just two days. The S&P 500 index lost 6.3%, which is the largest drop since 2015. World\u2019s 500 richest people lost<\/a> $139 billion overnight. Amazon\u2019s Jeff Bezos alone lost $4.8 billion. Over the last week of February, these top-500 rich people together lost<\/a> about $444 billion.<\/p>\n

Dow Jones Industrial Average and Nasdaq Composite are also continuing to decline. The MSCI World index capitalization lost<\/a> around $3 trillion over the last four trading sessions.<\/p>\n

Over the last week, the world\u2019s market lost $5 trillion in capitalization. According to Financial Times<\/a>, this is the worst trading week since the recession of 2008.<\/p>\n

\"Major<\/p>\n

Major stock indices dynamics chart. Source: Statista<\/a><\/i><\/p>\n

According to Bloomberg, China\u2019s car sales went<\/a> 92% down over the first half of February.<\/p>\n

\"Chinese<\/p>\n

Chinese Car Sales 2018\u20132020. Source: Statista<\/a><\/i><\/p>\n

About 60% of cars sold in China are imported. The most desired were the cars manufactured by Germany and Japan. A large dealership company Brigita has 100 of its shops closed for over a month now. The company\u2019s reserves are dwindling and banks are unwilling to extend debt repayment periods.<\/p>\n

On the backdrop of pessimistic expectations, panic, and the global decrease in business activity crude oil and other commodities are plunging as well.<\/p>\n

\"Crude<\/p>\n

Crude Oil (Brent) daily chart. Source: TradingView<\/a><\/i><\/p>\n

Goldman Sachs experts believe<\/a> that if the epidemic keeps spreading, the market price of gold will get to $1850 in Q2 2020.<\/p>\n

\u201c[COVID-19\u2019s] highly contagious nature will cause more cities to quarantine and will continue limiting people\u2019s ability to work. While the equity markets have been red hot to start the year, I am convinced that COVID-19 will continue to cause negative shocks for months to come. Companies will start missing their forecasts and the rest will snowball,\u201d <\/i><\/b>\u00a0<\/i>wrote<\/i><\/a> The Block\u2019s analyst Larry Chermak.<\/i><\/p><\/blockquote>\n

Despite the Chinese authorities\u2019 measures to try and stabilize the country\u2019s economy, on February 3d the country\u2019s exchanges witnessed the most radical downturn for the last 13 years. CSI 300<\/a> index lost over 9% and Shanghai Composite lost<\/a> over 8% showing the worst results since 2015. According to Bloomberg, a third<\/a> of all Chinese companies have only a month-worth of resources to keep the operations running. By the end of 2019, China\u2019s GDP growth rate amounted to 6.1%, which is the worst result for the last three decades:<\/p>\n

\"China\u2019s<\/p>\n

China\u2019s GDP growth rate<\/em>. Source: <\/i>TradingEconomics<\/i><\/a>.<\/p>\n

Nouriel Roubini thinks<\/a> that after the epidemic the world\u2019s economy won\u2019t get back on its feet quickly. He stresses that it is a global pandemic that\u2019s not confined to China. In his opinion, the fiscal and monetary incentives suggested by governments and central banks won\u2019t be sufficient to revive the business activities.<\/p>\n

Bank of America\u2019s analysts expect<\/a> the global GDP growth to slow down to 2.8%, which would be lower than the 3% result of 2009.<\/p>\n

Epidemic Impact on Cryptocurrencies and Mining<\/h2>\n

As Zodd Zverev, CTO of 1Thash&58COIN mining pool, told ForkLog, China\u2019s mining industry is facing dramatic changes. Back in January, Canaan\u2019s top executives left the country. Local ASIC manufacturers had to delay deliveries because of the quarantine measures affecting offices and production facilities.<\/p>\n

\u201cThe country\u2019s internal logistics is almost completely paralized. Strategic cargoes needed to fight the virus and food are prioritized. Given that people can\u2019t go to work and the police enforces this rule, delivery and installation of new ASIC\u2019s is virtually impossible,\u201d <\/i><\/b>said Zodd Zverev.\u00a0<\/i><\/p><\/blockquote>\n

He added that the economic uncertainty and the measures taken by the Chinese government increase the demand for crypto in the country. In his opinion, the decrease in China\u2019s electricity consumption may lead to a shutdown of several hydroelectric power stations, causing mining farms to stop and therefore the leading to a drop in the total hashrate.<\/p>\n

Although, the expert also sees certain positives in the given situation.<\/p>\n

\u201cObviously, the Bitcoin price is unlikely to double in anticipation of the halving, so any delay in deployment of new equipment will help the sector remain profitable. Even an event as dramatic and horrible as the coronavirus epidemic can bring some benefits along with it.\u201d<\/i><\/b><\/p><\/blockquote>\n

BitCluster co-founder Sergey Arestov is confident that the mining business located outside of China will gain profitability after the expected mining difficulty drop. This will have a positive effect on Bitcoin network decentralization.<\/p>\n

Canaan forecasts<\/a> that ASIC miners may soon get more expensive, as the disrupted production and delayed deliveries will cause a market deficit.<\/p>\n

In early February, the founder of BTC.TOP mining pool Jiang Zhuoer reported<\/a> that a large mining farm in China is at risk of being closed by the authorities. He argued that it isn\u2019t clear how stopping mining equipment will help prevent the spread of the epidemic.<\/p>\n

Alejandro De La Torre, vice-president at Poolin mining pool, told ForkLog that mining companies are moving from Southern to Northern China seeking cheaper electricity, while also moving away from the epidemic epicenter.<\/p>\n

\u201cYes, there are measures taken to prevent further spread of the virus, but for the most part everything works at full or at almost full capacity,\u201d<\/i><\/b> he said.<\/i><\/p><\/blockquote>\n

The chart below shows that there were no significant downturns in hashrate, although it\u2019s growth became somewhat slower.<\/p>\n

\"The<\/p>\n

The estimated number of terahashes per second (trillions of hashes per second) the Bitcoin network is performing. Source: <\/i>blockchain.com<\/i><\/a><\/p>\n

De La Torre hopes that the COVID-19 situation should normalize in 1\u20132 months, but there may be a short-term decrease in hashrate. He said that the industry needs mining companies outside of China and the virus creates the conditions for the development of such companies.<\/p>\n

A former Bitmain manager, who wished to remain anonymous, said that the virus hindered deliveries of new equipment. This may lead to a drop in Chinese mining farms\u2019 productivity. The companies without sufficient cash flow will be the first to suffer.<\/p>\n

\u201cIf the supply of mining equipment turns out to be insufficient, the farms won\u2019t be able to work as usual and will have to close because of the lack of funds. This will be a serious blow to the industry players,\u201d <\/i><\/b>he noted.<\/i><\/p><\/blockquote>\n

MicroBT representatives stated that up to 80% of the company\u2019s employees are currently working from home, but the business is up and running. Earlier the company had to extend the Chinese New Year holidays.<\/p>\n

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We hereby announce that the Chinese New Year holiday will be extended to Feb. 9th during the Corona Virus outbreak in China. For more details, please click here https:\/\/t.co\/qlk0fsxTkX<\/a> pic.twitter.com\/PnieXmOypm<\/a><\/p>\n

— WhatsMiner (@Whatsminer_MBT) January 29, 2020<\/a><\/p><\/blockquote>\n