The major reasons why crypto market crashed
We’ve recently reported about coronavirus and how it can affect the payment sector and food delivery market.
Today, PaySpace Magazine would like to talk about one more aspect of COVID-19. Somehow, the new global pandemic has affected a lot of areas of activities, and the cryptocurrency market is not an exception.
First of all, I cannot but mention the recent CoronaCoin, which is a cryptocurrency that would be raising in price as coronavirus spreads.
In other words, amidst the epidemic of the coronavirus, some developers created the cryptocurrency, the rate of which depends on the number of sick and dead people. The total number of CoronaCoin tokens is based on the world’s population.
What do we know about CoronaCoin?
The supply of CoronaCoin will be diminished every two days, and will depend on the rate of new cases. Namely, the price of the tokens would increase in direct proportion to the number of dead people (killed by the virus). Thus, the more people will die, the higher the price of CoronaCoin will be.
Sunny Kemp, who is allegedly one of the developers of the cryptocurrency, noted that some people are already investing in this very currency because they believe COVID-19 will spread further.
Some unverified sources claim the CoronaCoin team consists of seven people.
Mostly, users of social networks criticized the new cryptocurrency. People call it amoral, tasteless, and typed something like “This is why we can’t have nice things”. Others tried to encourage people to common sense and logic, while some of the users were making math jokes, such as “the more people get sick and die, the higher price of the CoronaCoin will be, which means when we all die, the price of tokens will approach infinity, but nobody will care since there will not be anybody”. Crypto skeptics left usual comments, such as “now try and convince me cryptostuff is not an idiotic hype”.
In response, the developers promised that they would monthly send 20% of the revenue to the Red Cross. The abovementioned Kemp has also compared CoronaCoin with «currently active pandemic bonds, issued by the WHO (World Health Organization).
Coronavirus and crypto market
On March 12, the Bitcoin rate fell by a quarter and for the first time since May 2019 fell below $6,000 (at the time of the writing 1 BTC was around $5,240). Experts attribute the price drop of Bitcoin to the collapse in the oil market and the news that the coronavirus has become pandemic. Thus, investors panicked, and began to sell cryptocurrencies along with securities and, on the contrary, buy gold. However, analysts believe the restoration of the digital currency market is just a matter of time, and the market will be restored by the end of spring.
Other digital assets show similar dynamics. For example, Ethereum fell by more than 25% (to $120), Bitcoin Cash – by 30% (up to $179), Litecoin – by 23% (up to $36), and Ripple – by 17% (up to $0.17); please note, all the data is valid as of 17th of March, 2020. The total market capitalization of electronic money decreased by a quarter – to roughly $170B. Such data was provided by the Coinmarketcap portal.
Analysts worldwide associate this situation with the aggravation of panic in the global financial market. So, the 12th March trading session revealed that the key stock market indices of the USA, Europe, and Asia showed a significant drop. For example, as a result of the Asian session on March 12, the Shanghai SSE Composite Index fell by 1.52%, and the Japanese Nikkei – by 4.41%. At the same time, during trading on European markets, the French CAC 40 index decreased by 12.3%, the English FTSE 100 – by 10.9%, and the German DAX index – by 12.2%. To cut the long story short, the American stock market didn’t show better results.
Most experts agree that the decrease in the rate of cryptocurrencies is caused by a general panic on the stock exchanges. Amidst the massive collapse of exchanges, players began to rebuild their investment strategies and, in particular, sell cryptocurrencies.
According to analysts, news about the coronavirus triggered panic in the global financial market. Particularly, when WHO announced that the outbreak of a new virus has become a pandemic. According to the most recent estimates, the total number of coronavirus infected in the world exceeded 189,000, while more than 7,500 infected people died.
At the same time, the price of securities and cryptocurrencies was triggered by a decrease in oil prices worldwide. If you are interested in the topic, then you should remember that on March 9, at international bids, oil prices fell by more than a third. This was the biggest collapse since 1991. The reason for such a market situation was the unexpected collapse of the OPEC alliance. On March 6, the parties were unable to agree on an additional reduction in oil production and decided to completely abandon all previously taken obligations.
What can I say, previously, investors have seen electronic assets as an alternative to the modern financial system, but now, apparently, the situation has changed. As a result of the general panic, cryptocurrencies acquired the status of risky assets (which should be sold first in times of market turbulence) again.
It seems like analysts worldwide do not expect a prolonged fall in the prices of Bitcoin and other digital assets. The prices of cryptocurrencies may begin to recover gradually in the coming months, following oil prices.
By all accounts, by the end of spring, the cryptocurrency market would be balanced. According to the most probable scenario, in the nearest future, the rates can recover by 5-10%. Moreover, some experts keep mentioning such a support for the cryptocurrency market as the launch of new currencies Libra and Gram.