Many people face the question if the spread of the Corona Virus affects Bitcoin and the price of the coins. Bitcoin has shown almost no correlation to any of the major markets and assets. You can check out the correlation of bitcoin to other assets on coinmetrics.
Disclaimer: This article is purely for informational purposes only and is no financial or health-advise!
Low correlation is no correlation
What you see here is a fluctuation around the zero correlation mark. Yes, it seems that there are more phases where Bitcoin and the S&P-500 are negatively correlated (this is what you would expect from a store-of-value or trading vehicle like Bitcoin) but the correlation is not far from random.
Bitcoin is a major asset and trading vehicle in China, hence there will be a measurable effect, but it is not clear in which direction this will play out.
- A) A virus is not a biological entity, it has no intentions and the effect is solely dependent on the static- and dynamical properties of the structures it relies on.
- B) A virus cant spread, it is spread by the hosts.
- C) A virus is no disease, the reaction of the host is the disease.
Fragility of the global economy – bush-fires vs. Corona
With the bush-fires in Australia in early 2020 we have seen how the accumulation of inflammable material increase the fragility of the system. When you safe trees from burning down regularly, then you only postpone the bush-fire, and when it happens, the resulting fire will be even bigger.
The same we see with debt and zombie-banks which are saved by the government. When you prevent systems from regular corrections, the system bubbles up and the next correction will be a major crash. Our good medical system prevent older and weak people to die from established diseases, so it is only logical that in the case of a new virus, the postponed effect of mortality kicks in. The high mortality of old people is a statistical artifact of postponed natural selection – a correction.
We live in a globalized world
The spread of negative effects is higher –> when a system shows global interdependence. Interdependence is when the elements of the system are highly connected, like our economies. Cascades can only happen in a globally connected structure. With ongoing globalization, the system becomes more efficient but also more fragile.
Bitcoin was build to be a robust system against governmental intervention – a so called sovereign grade censorship resistant platform. Bitcoin was not build to withstand global societal collapse.
The confusion with Bitcoins robustness
Bitcoin is made of two layers: the P2P-communication protocol. The Bitcoin communication network, where you and me transmit transactions, is based on the TCP/IP layer of the internet. TCP/IP was designed to be robust against nuclear attacks and catastrophes. The network is made out of nodes. The nodes are single computer-machines, which are run by users.
One node is enough – you don´t have to run a node
It is a misconception that everyone has to run a node. The P2P-Layer works as long as there is one node online where you can connect to. This could be a satellite in the orbit. Much more is not necessarily better. Nodes don´t validate transactions, nodes simply hold a copy of the chain (which is the consensus). So nodes add redundancy.
This is why you should not wish for an economic crisis!
P2P networks are very robust, from this aspect. Bitcoin can easily withstand a nuclear world war. The problem is the mining-layer. Miners as you know, are the validators of the system. With majority they validate the state of the system – this is what we call consensus. The consensus is the actual state of the blockchain.
Bitcoins are no “Zeros and Ones” on a computer!
The state of the blockchain is what makes your coins, it holds your coins in existence. Without constant validation there are no coins. Coins are NOT “zeros and ones stored on your device”, coins are an epi-phenomenon, they live inside the grid. Miners only validate as long as they are profitable. You now probably see the problem. When infrastructure suffers (e.g. energy supply), miners are affected. So, a global economic crisis is not what we want.
More interesting articles for Bitcoin researcher:
- ✅ Bitcoin invented by the NSA? Here is their Whitepaper!
- ✅ Where there Cryptocurrencies before Bitcoin?
- ✅ The Pre-history of Bitcoin – Who is Satoshi Nakamoto?
- ✅ Start your own crypto-blog and share your investigation – start to earn crypto!
