Bitcoin’s price rise is not because of coronavirus
There is no good reason to believe Bitcoin is rising because of coronavirus, but there are reasons to not believe it.
Every time Bitcoin crosses $10,000, that's the cue for non-crypto media outlets to explain why it's rising, usually with more confidence than accuracy.
Today, the bad explanation is the "coronavirus and safe haven" story, as seen in The Guardian, which cites CNN, which points at the correlation between Bitcoin prices and the virus outbreak, and that gold has also been doing quite well lately.
The good news is that this headline lets media outlets tick both the "Bitcoin" and "coronavirus" boxes on their bingo cards. The bad news is that it's mostly nonsense.
To be fair, The Guardian only said the virus is "considered a factor", and it instead pointed at the halving as the main driving force. CNN was less critical though, and ran with this more hysterical headline: "Bitcoin is soaring as investors panic about coronavirus."
One simple trick doctors don't want you to know
Bitcoin has been on plenty of runs before, and it's gone much further and faster than this without any apparent help from infectious diseases – unless you consider protectionism an infectious disease.
And subscribing to this coronavirus-Bitcoin theory also means you have to avoid asking why Bitcoin started the current rise before the first cases were even reported, and way before its severity became apparent.
A quick and dirty look at Google Trends suggests there wasn't much public awareness or concern about coronavirus (outside of China at least), until 23 January, when the WHO convened an emergency committee on the virus and people were really starting to worry.
But Bitcoin's ascent was already well on its way. It made a clear break away from its traditional support level in the $6,000 range prior to 12 January, and in some corners this break had analysts predicting future rises. Bitcoin prices continued to rise steadily between 12 January and 21 January, making big moves which absolutely no one attributed to an obscure disease that shut down a seafood market in Wuhan.
Bitcoin had already been through it's hard and fast rise. From there, right as coronavirus really started heating up the headlines, Bitcoin prices spent weeks creeping sideways and gently upwards, in a period of unusually low volatility. Overall Bitcoin trading volumes also decreased considerably compared to the previous weeks, right as coronavirus was all anyone could talk about.
What happened next will shock you
After steadily creeping closer to $10,000, a period of robust trading saw Bitcoin solidly break $10,000 after a couple of attempts on 10 and 12 February. That's where we are now, with people just retroactively ascribing the whole thing to coronavirus.
Or maybe they're just ascribing the last $400 of Bitcoin gains to coronavirus, while the reason for the previous $4,000 isn't important.
Another problem with the theory is the fact that Bitcoin doesn't really act like a safe haven asset, and its returns are overall not significantly correlated with gold. By the numbers, you can't expect them to go hand in hand or point at any brief flashes of correlation as are seen today, as an example of Bitcoin acting as a safe haven. And even if Bitcoin was a safe haven, the coronavirus theory still wouldn't explain why this seems to be a full-blown altcoin season.
It's not possible to say coronavirus is having zero impact on Bitcoin prices, but it's kind of trashy to imply that "bitcoin is soaring" because "investors panic about coronavirus".
Disclosure: The author holds BNB, BTC at the time of writing.
- How one Bitcoin whale mangled the network
- “Got a lot wrong”: Goldman Sachs tries dissuading investors from Bitcoin
- Survey: Millennials more pro-Bitcoin now than in 2017, age 65+ less
- What old Bitcoin transfers tell us about the value of a coin
- Bitcoin prices take pessimistic tone after failing to reach US$10k