Crypto-Rallies and Caronaviruses: Not everything is connected

Crypto rallies and the fear of the coronavirus – many people believe that these two phenomena are closely related. But despite the correlation, some experts believe that there is not necessarily a connection.

Mati Greenspan, the founder of Quantum Economics, offered his insights into the obvious links between the two events. “So far I have not seen a direct correlation between the coronavirus and the rates of exchange in crypto-currencies.” Instead, Greenspan referred to the current Altcoin rally as an indicator of a growing appetite for riskier investments:

“My guess is that we are currently in an upturn for Altcoins, and this generally tells us that people want to take more risk when they have a little more money. That’s exactly what is happening in the equity markets. It’s very likely that what is driving crypto currencies right now is a ‘risk sentiment’ and not a flight to safety.”

BTC network is stronger than ever

Stories about the closure of Chinese cryptomining providers seem to have had little impact on the hash rates of the Bitcoin (BTC) network. The network is working harder than ever before and hash rates continue to compete with each other and exceed previous all-time highs, according to Blockchain.com.

If such shutdowns were significant, a slowdown of the network would be one of the most obvious indicators of such a relationship, especially considering the high percentage of mining pools concentrated in China. CoinShares Research estimates that, according to their research, between 65% and 70% of all BTC mining pools are located in China.

 

Other influencing factors

According to Greenspan, other narratives play a much greater role under the current conditions: “As far as narratives are concerned, halving is a big issue. It’s one of the main drivers of the market. ” The reward for mining blocks of Bitcoin will be cut in half in May, creating scarcity and an expected increase in the market price of Bitcoin.

Greenspan went on to address what he believes is the most powerful cause of the rapid rise in risky assets: central bank monetary policy.

“The more action taken by the central banks, the more money injections we get from the Federal Reserve, the European Central Bank and the People’s Bank of China. They just push money into the system and that money has to find a home.”

 

Regarding the danger of hyperinflation, Greenspan referred to the recent economic fiascos in Venezuela and Zimbabwe, adding that this phenomenon is likely to happen at some point, but not everywhere:

“This will not happen in the big economies like the United States, Japan and China… Even economists don’t really understand why there is no significant inflation after all the money that has been pumped into it. It is the biggest economic mystery of our generation.”