To say that the Coronavirus is leaving an incredible impact on the world today would be a gross understatement.
However, it’s not just in the well-being of millions that the virus is affecting. In fact, investors and policymakers are coming to the realization that the epidemic is going to have a much bigger impact on the global economy than they presumed.
Now, the exact size of this impact is up in the air at this point in time. No one knows for sure just how big - or small - it will be.
The general public has already picked up on the health issues that stem from the Coronavirus outbreak. However, with its gradual increase, people are starting to notice other problems that go beyond the health of the masses.
There is an overall sense of mistrust that is being felt towards the government and news as a whole. There is a noticeable lack of transparency, making it unclear as to whether cases are being under- or over-reported. It is not outlandish to assume that trade wars coupled with the upcoming presidential election in the U.S. may be distorting the truth.
There is also the dawning of the realization of our dependence on China functioning as the world’s supply chain. This includes electronics equipment and has already manifested with Apple stalling the production of iPhones.
Ultimately, though, one of the biggest problems that the epidemic exposes ties into economical ramifications. There is the exposure of the true weakness of a world economy that is propped up on debt and inflated stock values. Not to mention the constant infusions of fiat.
Following two straight days of experiencing nothing but a continued plummeting, the Dow closed out its worst 48 hours. Not since the 2008 recession has the index performed so badly. This reaction to the outbreak of the virus is obviously indicative of the dominating fear induced by the spread. In addition, it has revealed the precarious structure of our global economy.
Last week, the financial markets were seemingly of the belief that the Coronavirus would be contained. The new cases that came from Italy, South Korea, and Iran over the weekend would prove that assumption otherwise.
The World Health Organization is actively trying to mitigate the panic and reassure the public. On Monday, they spoke of the disease, saying that it is not yet classified as a pandemic, though several days later Australia announced it as just that. The reason for this being that the way in which it is spreading is not in an uncontained manner.
One can easily trace a majority of the economic impact of a virus outbreak to the efforts to contain it. Tracing the impact to a factor like the effects of the disease itself will provide very little substance. As attempts to quarantine those at risk of spreading the disease continue, we simultaneously shut down economic activity.
While the Dow has been on a downward spiral as of late, there is another form of finance that appears to be performing better. Cryptocurrencies like Bitcoin and HEDG reacted moderately with a bit of a selloff, but they are now ticking back up as the DOW continues its slide.
Bitcoin is a frequent uncorrelated asset during the event of stock prices suddenly plunging worldwide. It did experience a dip this week, but it is evident that Bitcoin and altcoins - like HEDG - are maintaining stable ground. Bitcoin price determination is purely by demand and not at all like stocks and fiat. Those typically use markers such as interest rates and GDP.
Both altcoins and Bitcoin provide unique financial opportunities for countries that are in trouble:
It’s not just Bitcoin and HEDG that are seemingly thriving. Ethereum Futures are also displaying great momentum in daily volume. According to the study results from data provider, Skew, Ethereum Futures’ Aggregated Daily Volume was recorded as being very close to its all-time high mark from May 17 of last year.
Dave Waslen, CEO and Co-founder of HedgeTrade, a Singapore-based social trading platform, weighs in on the ripple effects this outbreak may have on markets and how cryptocurrencies could potentially help:
“Here in Asia, we’re seeing airline shutdowns, travel restrictions and the many effects of those occurrences on business, tourism and even fuel markets. What bitcoin and some altcoins like Ethereum and HEDG can provide is access to assets that are out of bounds from regulators, political maneuvering and central bank manipulations. What we’re all trying to do is increase people’s access to sound money, which in times of distress may offer a better option than fiat and stocks.”
While the virus continues its course, those of us in the fintech industry will continue to work towards a better economic reality -- one that can sustain a crisis without adding undue financial risks.