In the context of the coronavirus pandemic, governments are taking measures that, together with a general panic, weaken industry and financial markets, both traditional and cryptocurrency. As in other areas, the largest projects in the crypto industry are canceled or frozen. Bitcoin, being the first and the main cryptocurrency, has also suffered from economic shocks caused by COVID-19, but what will happen next?
Detected at the end of December 2019 in Wuhan in central China, the COVID-19 has spread throughout the planet. The World Health Organization (WHO) has officially announced the virus a pandemic, a global epidemic. The risks of such a development of events were the first to be seen not only by specialists, but also by technology. So, the BlueDot AI made the first warning about coronavirus on December 31, 6 days earlier than the US Centers for Disease Control and Prevention.
According to WorldMeters, on March 31, 853864 cases and 42000 deaths associated with the COVID-19 virus were recorded. If until the end of February, China remained the epicenter of the coronavirus with more than 80,000 cases, now the virus has spread to all continents, spanning Europe, the USA, Africa, Australia. HealthMap now updates its map of the coronavirus distribution real time using artificial intelligence.
Countries are taking emergency and preventive measures. Schools and universities are closed, cultural and sports events are canceled, the canceling the Olympics, scheduled for July and August 2020 in Japan, is confirmed. Following Israel, the European Union decided to close the borders and let in only citizens and residents. The combination of these measures and the panic on the part of investors are some of the causes of global economic shocks.
13 years ago, in his book “The Black Swan”, Nassim Nicholas Taleb predicted “a very strange virus spreading all over the planet”, the active progress of which was associated with the number of people traveling. The outdated design of the aircraft, which allows the spread of infections in the cabin, combined with the airport infrastructure unprepared for the epidemic, allowed travel to accelerate the spread of the dangerous virus.
Data analysts from Russia concluded that coronavirus is more dangerous than seasonal flu, but only for people at the epicenter of the virus. But even if actual mortality rates are not so serious compared to other diseases, it is expected that panic will only increase.
Government measures to combat the spread of the virus include closing borders, limiting working hours and the so-called “social distance”, which implies a decrease in the social activity of each individual and groups of people. Each business related to tourism and travel, events, retail, training or transportation is expected to incur significant losses. When restrictive measures are applied in regions where small and medium-sized enterprises are heavily dependent on tourism, as, for example, in Italy, the plight of the economy of such regions is awaiting.
Of course, when some doors close, others open, and enterprises can flourish in the digital world, as the video game and video streaming industry in China has demonstrated this winter. According to Sensor Tower research company, the total number of game downloads in the Apple Store in China this year increased by 27.5% compared to last year, and the revenue of these applications rose by 12.1%. Nevertheless, global economic shocks rarely remain without consequences for the financial infrastructure, on which even fast-growing enterprises are highly dependent.
And the financial industry is already showing signs of a deep crisis. According to the New York Times on March 8, Wall Street experienced a greater shock than after the 2008 financial crisis, when important indicators like the S&P500 and Dow Jones plummeted. On March 20, US exchanges closed at a three-year low. During one trading session, the Dow Jones and S&P500 lost 4% each, and at the end of the week, the S&P500 fell 15%. This is a major failure since October 2008.
Major cryptocurrency events are being canceled or postponed due to the spread of the virus and new restrictive measures. And this is true not only for the most affected countries. For example, London Blockchain Week, although it managed to take place before the ban on crowded events was introduced, ran into low attendance. Some conferences, such as WeWork Blockchain Labs, switched to online formats, which means that partnerships that could be concluded during the event did not take place. The cancellation and rescheduling of international conferences and forums means for the blockchain and crypto industry that there will be less collaboration and transactions.
Mining was also negatively affected by one of the key infrastructure areas of the crypto world. Two-thirds of mining capacity is still concentrated in China, the epicenter of the virus outbreak. While the hash rate of bitcoin, apparently, does not depend on the crisis and continues to grow, in the worst scenario, mining farms are still expected to close and, as a result, the hash rate will decrease. On the other hand, this month the epidemic in China is slowing down, which gives some hope to miners who were previously paralyzed by the lack of internal logistics. If the situation improves, ASIC miner manufacturers will again be able to deliver their products to customers.
In general, the introduction of a blockchain is not of primary importance in the face of devastating consequences for public health and economic downturn. One can expect a reduction in blockchain transactions, especially in the sectors most affected by the crisis, such as tourism and entertainment. When the whole world is paused, this is reflected in large innovative projects, for example, the project of the Chinese government to launch the digital yuan.
On March 10, 2019, Bitcoin was trading at less than $ 4000, at the beginning of March 2020 it overcame the $ 9000 mark, but could not hold its position and returned to $6000.
The cryptocurrency market has long been accustomed to such volatility. But in early March, news of coronavirus outbreaks was also accompanied by a collapse in the oil market. Futures on Brent Crude Oil fell to a record $25.98 per barrel. Moreover, the sharp decline that began on March 5 accelerated in a matter of days, forcing experts to forecast $20 per barrel, calling it the largest collapse in 30 years.
Although it is expected that short-term volatility will continue, the medium-term outlook for Bitcoin looks good. Halving is approaching, hashing speed is growing steadily, reaching record heights. Positive actions of regulators are also observed on the horizon: France and Germany are on the way to recognizing bitcoin as a financial asset, South Korea fully legalizes cryptocurrencies, and even the long-standing position of rejection of cryptocurrencies in India begins to change. Some experts argue that in the long run, the current economic crisis may reveal the true value of cryptocurrencies.
Technological solutions are critical during any major epidemic event. COVID-19 outbreak is no exception. DeepMind, a division of Google’s artificial intelligence, has openly published coronavirus structural forecasts created by artificial intelligence. Insilico Medicine, a Hong Kong-based artificial insemination startup, has also opened its database of artificial intelligence-based vaccine research components to other companies around the world to accelerate the development of an anti-coronavirus vaccine.
In February, Chinese health authorities proposed improving the existing system using AI and robotics, with the support of the business to combat the outbreak of the virus. As a result, robots have been launched in China to disinfect and deliver vaccine to combat the outbreak of coronavirus, and engineers continue to develop robots that can help doctors working on an advanced epidemiological front.
The blockchain industry is also useful in difficult times, it is ready to go to reduce risks, minimizing the necessary human contact. For example, blockchain-based insurance platforms help with compensation for losses without the need for personal participation, and crypto-exchanges and exchange services provide the ability to complete all financial transactions online.
“Of course, we feel a certain influence on the situation with the coronavirus, although they are much less susceptible to any changes in the business model, in any case, until total quarantine is introduced. Our model initially assumed the smallest possible contact time between people, you can make all transactions without leaving home. We expect a surge in interest in digital currencies after the end of this story, especially against the backdrop of the Fed's decision to fill the stock market with an unlimited amount of cheaper dollar to buy any amount of distressed assets. Everyone, it seems, already doesn’t care how much the US national debt is - today 23 trillion, in a couple of years, maybe 50, and for $ 100 you can buy a Bigmac with a cola. The main thing is that the indices would grow. In such a situation, more and more people will turn their attention to the inflation-proof bitcoin, which can safely break past highs and become one of the settlement mechanisms in the legal sphere of the economy, and especially long-term investments and savings.” Sergey Mendeleev, founder of the Garantex exchange, said.
Bitcoin can also serve as a way to diversify a portfolio when traditional markets are on the path to crisis along with the global economy. No expert can predict what will happen during the economic turmoil, but all experts vote for maximum diversification. This is probably why BTC and other major cryptocurrencies are again showing growth.
Cryptocurrency startups Casa Hodl and Unchained Capital report increased demand for inheritance services for crypto assets due to the coronavirus pandemic.
Casa Hodl and Unchained Capital are seeing a sharp increase in requests for proof-of-death services or similar wallet schemes with multi-signatures that allow to automatically transfer BTC to the heirs in the event of customers’ premature death.
“In recent months, we have seen the highest demand in the history of our company,” said Will Cole, Unchained Capital product director. “Many storage options are configured by customers so that assets can be inherited. Especially often, such a request arises in the last few weeks. "
Casa Hodl CEO Nick Neuman said that half of the potential customer’s requests in recent years have been related to Casa Covenant’s crypto assets transfer service launched last year.
According to Neumann, the number of customers in the first three weeks of March compared to January and February tripled for a product of the Diamond class, which includes Casa Covenant service. Casa Hodl plans to add this feature to its first and second tier Gold and Platinum products soon.
“We allow customers to store private keys and safely transfer BTC to heirs if necessary. Thus, customers never have to transfer control of their BTC to a third party.” Neumann said.
Meanwhile, the pandemic increased the motivation of Ethereum developers to create a similar infrastructure. At the Ethereum community hackathon in Denver, the Alfred project was recently proposed, which includes a set of tools for inheriting ERC-20 and ERC-721 standards tokens.
"From a technical point of view, the system will consist of two parts: an oracle service that regularly scans publicly available sources for obituaries, and an escrow service", Seth Goldfarb, a project participant, said.
When the oracle discovers evidence of the customer’s death, the escrow system begins to count down before sending its crypto assets to a selected third party, for example, a family member. According to Goldfarb, the system will have a function with which the user can stop the transfer of funds if he has not died. The project is under development for the time being.
Despite the sensitivity of this topic, inheritance protocols are a necessary component of the technological stack, since digital assets must be stored, and especially if they grow in value.
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