Many observers of cryptographic markets believe that the direction of the cryptocurencies course since the beginning of the year is largely dependent on the coronavirus epidemic. Is this interpretation correct or is it just an accidental overlap of unrelated events?
Overinterpretation
Quantum Economics founder Mati Greenspan believes that looking for links between cryptocurrencies price rises and growing panic against coronavirus is the wrong track. According to the analyst, the ongoing rally is for completely different reasons.
“At the moment, according to my estimates, we are in the alto season, which generally tells us that people are looking for risk if they have some extra cash. This is also what happens in the stock exchanges. What’s probably driving the crypt now is a “risk-taking” sentiment, not an escape to safety.”
The opinion that Bitcoin is a storehouse of value similar to gold is becoming more and more common. However, Greenspan claims that people in China or somewhere else in the world don’t think in a way: “People are dying, so I’ll buy Bitcoin.”
The coronavirus and the mining power of Chinese mines
The coronavirus affair will certainly leave a strong mark on China’s economy. The increasing number of cases and the ubiquitous quarantine have resulted in fewer workers coming to Chinese factories every day. The natural consequence of this is less production and weakening trade. Many experts claim that the worsening situation in the country of the measure will have a negative impact on the economies with strong ties to China.
Such dependence is not evident in the mining capacity of the mine, which has no interest in the coronavirus. CoinShares Research estimates that more than a third of all mining fields are located in China, and a decrease in capacity would slow down the network. No such phenomenon has been observed so far, on the contrary. BTC’s network’s Hash Rate is doing very well, and with the next few weeks, it is breaking the historic highs. The biggest mines like: F2Pool (19.59% of the market), Poolin (14.73%), BTC.com (11.26%), AntPoll (8%) or ViaBTC (5.45%) show no weaknesses and operate as before.
According to the information obtained from spokesperson Bitmain, the health crisis in China does not have a significant impact on the mining industry.
Potential causes of growth
The strong appreciation of the crypto market is due to other reasons, claims Mati Greenspan. It all started with an attack of an American drone on an Iranian general, which resulted in the death of a military man. This event started a dangerously promising conflict between the US and Iran. The BTC price then fired and still maintains a bullish attitude, both technical and fundamental.
Another reason for the strong upward movement is the imminent division of the prize for the excavated block. For mining and the maintenance of the network to continue to pay off miners, the price of BTC must rise.
Another important aspect that Mati Greenspan raised is the search for high risk investments by investors. This could result in much stronger increases in altcoins compared to the mini-bubble in the middle of last year, when Bitcoin played the main violin. It follows that people are not looking for a safe haven for their money but risky investments with the highest possible rates of return. They do not pay attention to the presence of coronavirus.
Delayed inflation?
Digging into the issue of current growth, Mati Greenspan points to another important reason why investors choose risky investments. This is the monetary policy of central banks.
“The more we look at central bank activities, the more we see cash injections from the Federal Reserve, the European Central Bank and the People’s Bank of China. They’re just pushing money into the system and that money has to find a home.”
When asked about the potential problem of hyperinflation in the world, the founder of Quantum Economics notes that this phenomenon will certainly occur, but rather not everywhere. He added that despite the huge amount of money pumped into the world’s leading economies such as the USA, China and Japan, there is no significant inflation among them. This state of affairs is the biggest puzzle for economists today.
In your opinion, do you think that investors, for fear of high inflation, prefer to invest their money in alternative cryptos?
