COVID-19 impact on the world economy: will Bitcoin stand against the crisis?
No one knows what the future holds. However, no one can prevent me from making assumptions based on my own experience either. How different areas of our lives will be influenced by COVID-19? The politics, the world economy, the social life and my favorite niche of blockchain technologies — what will happen in the nearest few months? In this article, I’ve decided to sum up and share my thoughts on this topic.
What we know about COVID-19
I’m not a medic as my main area of specialization is related to blockchain and cryptocurrencies, so I wouldn’t pretend to be a know-it-all. But before I talk about the pandemic’s influence, let’s first list the facts about COVID-19 that are available on the web to the general public:
- COVID-19 has no symptoms during the 1st week after the infection.
- The disease has a low death rate among youth and a high death rate among the elderly generation (up to 15–20%).
- In easy cases, it has practically no symptoms, but in severe ones, infected people suffer from high body temperature and suffocating cough.
- Those who have recovered get immune to the virus.
Since healthcare organizations are not suited for such an influx of patients that they have now, it would be wise to take some precautions so that the health treatment wouldn’t be needed at all. Here’s what can be done in order to prevent the virus from spreading:
- Cancel all public events.
- Work and study from home is possible.
- Reduce contact with other people.
- Follow personal hygiene best practices.
However, despite all these measures, in some regions such as Italy and especially the US, the virus is now spreading exponentially. With the current level of international collaboration, this may have a significant negative impact on all areas of our lives at a long-term perspective.
COVID-19 impact on the politics
Populations worldwide are in a panic, people demand from politicians to implement the quarantine. Some countries have already done that, others won’t lock the barn until after the horse is stolen. Here’s how the society may react to every given politician’s action or inaction:
- Quarantine is implemented, the pandemic successfully ends. The politician is the hero of society and he or she has good chances to be elected.
- Quarantine is implemented, the pandemic doesn’t end. Well, this politician has done all that he could, let’s not blame him for the inability to stop the avalanche.
- Quarantine is not implemented, the pandemic successfully ends. That’s not his merit.
- Quarantine is not implemented, the pandemic doesn’t end. The politician is as bad as he could be.
As you can see, regardless of the outcomes, for politicians it’s better to implement the quarantine anyway. However, there are businesses’ interests on the other hand. Big companies such as national airlines, for example, have a big influence on the political climate. In the situation when all the transits are banned, their money losses may be pretty high.
COVID-19 impact on the economics
SMBs and enterprises: While enterprises bear big losses, small and medium-sized businesses will mostly go totally extinct. Remember your beloved cafe over the street corner? Say farewell as it most likely will not survive the crisis. The same applies to beauty salons, house repair services, music bands and all other types of services that strongly depend on customers’ physical presence. However, there’s no need to despair as a whole bunch of new self-made SMBs will surely reappear once the crisis goes down, just as they did before.
International corporations: Next, the borders’ closure will have a serious impact on international businesses where different regions are involved in the production. Take your favorite iPhone, for example. The key project is developed in the USA while all its components are created in China, South Korea, Japan and who knows where else. You were waiting for iPhone 12 this September? Embrace yourself and use the old one.
Global economical impact: Finally, inflation and global recession are practically inevitable. The Dow Jones index has dropped by nearly ⅓ over the past month. The drop is already as bad as it was back in 2008 and there are no prerequisites for the situation to improve. Governments may print money to put out this fire, but this would only be a temporary solution to the global problem. They have done this many times before, but with every new crisis, the efficiency of this solution decreases.
COVID-19 impact on cryptocurrencies
Although Bitcoin is positioned as a safe haven for your savings in times of inflation, it has also lost around 40% of its price over the past month. It dropped by almost 50% on March 12th as the hysteria around COVID-19 reached its peak and many hodlers rushed to cash out their bitcoins to be able to buy food and medicals.
Now that most big factories have stopped working, a big lot of unused electricity has emerged. Big Bitcoin mining farms can take their chances of buying this unused power at lower rates and push new blocks’ production. This would get Bitcoin to the next halving (and the next bullrun) faster.
What does the future hold?
The size of the global population will not significantly decrease, this is already obvious. The death rate is quite low, so no need to panic about that. But economics will surely suffer. Many people have already lost their jobs.
I don’t want to look too pessimistic, but if the US doesn’t manage to hold back this avalanche, the Great Depression of the ’30s may seem like heaven compared to what may happen pretty soon.
The good side is that this Work-From-Home aka WFH movement has revealed the lack of necessity for all workers to stay in the offices all the time, at least in the IT sector. Many companies may give their employees more freedom after things will get back to normal.
Another piece of bad news is that Big Brother will make an advantage out of this situation to watch you even closer. To detect infected people, Chinese developers have significantly improved their face recognition technologies and now can identify a person even with a partially hidden face. No one can prevent authorities from implementing this technology worldwide after the pandemic ends and increase the level of control over the population.
This can make people turn once again to cryptocurrencies that were invented particularly for such cases and push Bitcoin’s adoption further.
- The Guardian March 26th, 2020: Record 3.3m Americans file for unemployment as the US tries to contain Covid-19
- BBC March 3rd, 2020: Coronavirus: China’s tech fights back
- Dow Jones industrial average
- Why Bitcoin is so hard to legalize