Can bitcoin volatility be controlled? How does the coronavirus outbreak effect bitcoin?

bitcoin, cryptocurrency, digital

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We have seen the value of Bitcoin plummet as the Covid-19 pandemic intensified in the Western world, largely due to the high price of Bitcoin and its volatility. I analyzed data from the bitcoin exchange Mt Gox, the largest in the world, to examine changing transaction patterns. As a result, more bitcoin is flowing in and out than ever before, with traders wanting to either buy or sell because of volatility. 

Daniel Wolfford, who once traded in Bitcoin and is the former head of cybersecurity at Blockchains LLC, told Newsweek that the broader market and crypto exchange platforms can easily be manipulated by people holding large volumes of cryptocurrencies and messing with supply and demand. He explained how “whales” can be highly emotional and speculative, but also blamed the websites that trade in cryptocurrencies, such as Coinbase and Bitfinex, which are used to trade in cryptocurrencies. While acknowledging that some users may have reduced their losses, he pointed out that heavy falls are generally viewed as positive rather than negative, and rejected the idea that Bitcoin is no longer a safe haven. Given the many factors at play, it is very difficult for cryptocurrency analysts to predict what will happen next, let alone for Bitcoin investors. Although Bitcoin and other cryptocurrencies cannot easily be exchanged for essential food and clothing, they are still open to the public and therefore accessible to the general public. So, if the virus quarantine continues, it will have a negative impact on Bitcoin and all other cryptocurrencies. Moreover, the bitcoin price may benefit in some cases, but the market may falter due to a lack of liquidity in the cryptocurrency market due to a lack of supply and demand. Kehan Zhou explained that Bitcoin and alternative currencies tend to increase in value when people lose confidence in traditional financial markets. Moreover, in times of crisis, people are flocking to more familiar options that Bitcoin has not yet conquered or reached a level of notoriety on which to rely. Zhou also said that the decline of bitcoin in other financial markets has more to do with the lack of liquidity in the cryptocurrency market than with bitcoin itself. But he believes that Bitcoin could fill up if the crisis is the result of a supply chain shock, not a lack of liquidity in the cryptocurrency market. In other words, the effects of the coronavirus may be due more to what, might happen than to what, actually happens. But because its impact is so unpredictable, it will teach the world how many ways it does not know what it does not know and what is happening or could happen. And the impact of this will be felt far and wide in markets, not only in the US and China, but also in other countries. However, the price movements resulting from the continued spread of the coronavirus seem to tell a different story than the prices of cryptocurrencies have shown. 

At this point, it seems that the biggest risk to financial and cryptocurrency markets appear to be investors who did not do their homework in the crisis and liquidated their assets at all costs. Whether you buy or sell, here’s the bottom line: the market is already panicking, and it’s showing. Once bitcoin is halved, existing mining facilities will become inefficient, and mining companies will have to replace old equipment to meet the challenges of the new algorithm. To get an idea of whether Bitcoin can function as a store of value, traders need to look back on the massive drop in prices in March, which dropped the price from about $8,000 to $4,000 in a single day. The decline was caused by bitcoin being dragged along with everything else that was sold. Investors sold stocks amid fears the global economy would plunge into recession, leading to sharp losses in markets around the world. It plunged into a big crash, causing the Dow and everything else, including oil, gold and silver, to crash.

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