In the autonomous region of Inner Mongolia, an increased threat level has been declared by the end of the year. More than half of the bitcoin mining enterprises are located in the country, which is preparing for the release of the national cryptocurrency.
In China, the third level of epidemiological danger has been declared due to a patient who has been confirmed to have bubonic plague. The disease was also found in two Mongolians, one of whom, already being sick, had direct contact with 60 people and indirectly with 400. China is a large market for cryptocurrencies, a significant part of miners work there, and the authorities are preparing to issue a national cryptocurrency – the digital yuan. Therefore, any global events within the country can potentially affect the value of a new type of assets.
The third level warning, which was announced in Bayan-Nur, prohibits the hunting and eating of animals – possible carriers of the plague, and also encourages the public to report any suspicions of plague or fever without clear reasons, as well as any sick or dead marmots. Forbes writes that from time to time the plague appears on all continents. For example, in the United States since 2000, an average of seven cases of human plague have been reported annually. However, the disease does not spread like COVID-19, because in this case, effective treatment methods have long appeared. Overall, there were 26 cases of plague and 11 deaths in China from 2009 to 2018.
Despite suffering from the bubonic plague, Chinese stocks continue to rise in value. Now there is a V-shaped recovery. This comes amid weakening risks to the Chinese industry due to the opening of the US and European markets. For example, today, July 6, the Shanghai Composite index updated the highs of April 2019, it has risen 5.71% since the beginning of trading, the growth has become one of the strongest within a single day since 2015.
“The common reason for such sentiment could be the fiscal and monetary stimuli adopted in the wake of the COVID-19 pandemic, as well as the fact that the Chinese market could receive support from positive macro statistics – for example, in June 2020, the Caixin China services PMI rose from 55 to 58.4, which is a multi-year record of monthly growth. In addition, market participants note the increased activity of Retail-investors. The latter, faced with declining yields in many other instruments, are increasingly turning to the stock market, ”explained Mikhail Smirnov, an analyst for international markets at General Invest.
He warned that not all of the Chinese market rallies were sustained or stable. With a further deterioration of the epidemiological situation, in the event of the re-introduction of restrictions on the movement of people and business activity, shares of companies from China may fall significantly in price, Smirnov warned.
How cases of bubonic plague can affect mining
Among the Chinese companies, whose shares may suffer, there are large manufacturers of mining equipment. For example, Canaan, which in November last year held an IPO on the Nasdaq exchange and raised $ 90 million, as well as Ebang, which sold 19.3 million shares for $ 101 million. Despite a gradual decline, the share of Chinese miners in the total bitcoin hashrate remains extremely high. …
According to the analytical company TokenInsight, at the end of April this year the indicator was 65.08%, and in September 2019 it exceeded 75.63%. For comparison, in the USA the share of miners is 7.24%, in Kazakhstan – 6.17%.
“China is undoubtedly a huge player, and the number of people in it is large. If it occurs to someone to buy bitcoins hysterically, it will have an effect locally, but there are no prerequisites for a serious price change at the moment, ”says Sergey Troshin, CEO of the Six Nines data center.
If China is struck by a new serious virus, due to which the quarantine begins, then the authorities may decide to close the mining factories and farms. However, mining cryptocurrency is a fairly autonomous business that doesn't require a lot of people. During the quarantine at the beginning of the year, many businesses continued to operate, and employees lived directly on the farms.
“If mining plants stop, Bitcoin will fall. There are no significant threats for the cryptocurrency market at the moment. Even the coronavirus, with a significant recovery rate, could not seriously affect the operation of cryptocurrencies. For a while, the risk hung over traditional payments due to quarantines at bank offices, but not over decentralized currencies. The plague is hardly a danger to the huge Chinese economy, and even more so for cryptocurrencies, ”Troshin explained.
Why the release of the digital yuan does not depend on the epidemiological situation
The topic of national cryptocurrency is actively developing in China. Last week, consulting firm BlocksBridge reported that the second most popular taxi app Didi could become the first private company to start accepting the national cryptocurrency.
We are talking about the digital yuan, which is being prepared for issuance by the People's Bank of China. Now the regulator is assessing the stability and practical value of the national cryptocurrency, as well as ease of use, the possibility of using it on various platforms and controlling risks. The development, standards creation, feature research and integration testing are now complete. However, the release date is unknown.
“A single case of the disease will not in any way affect the plans of the billion-dollar country in the field of cryptocurrencies, especially the launch of the digital yuan into circulation. The Chinese authorities are monitoring this issue. Of course, any message about the incidence in China today is perceived very sharply, given the fact that the first outbreak of coronavirus occurred in China, ”said Yuri Mazur, head of the data analysis department at CEX.IO Broker.
In the first quarter of this year, the People's Bank of China was forced to postpone the digital yuan development program. The reason is the quarantine introduced due to the coronavirus, which affected government agencies. The release of a national cryptocurrency is also necessary for the country to resist US sanctions.
How disagreements between the United States and China could affect the bitcoin rate
In late June, the National People's Congress (NPC) passed the Hong Kong National Security Law. The new rules, which were actively opposed by the American government, took effect on July 1. National Security Adviser to the President of the United States Robert O'Brien warned that if the document is adopted, sanctions will be imposed against Hong Kong and China.
Last year, when the US imposed sanctions on the DPRK, the yuan weakened. As a result, Chinese investors began to use the cryptocurrency as a defensive asset against the devaluation of the national currency. The demand for the digital coin was so great that users paid up to $ 300 extra per trade as a premium.
“With the fall of the national currency, the demand for cryptocurrencies such as bitcoin has traditionally increased. In the event of a pandemic, the demand for contactless virtual means of payment increases, since people do not want to physically touch money. If both scenarios happen at the same time, then the entire range of cryptocurrencies will be in demand, ”said Grigory Klumov, founder of the Stasis.net stable cryptocurrency platform.
According to him, a paradigm shift is taking place now. The pandemic has prompted a rethinking of the need to be in the office. If earlier people were afraid to enter the card number on the Internet, now it is a standard procedure. Psychologically, the world is opening up more and more to the adoption of the concept of cryptocurrencies.
Bubonic plague diseases occur almost every year, and the case in Bayan-Nur was considered far from the most dangerous. Experts believe that this event is unlikely to turn into something more serious, since at the moment people have learned well how to protect themselves from this disease. Experts believe that nothing threatens cryptocurrencies at this stage. On the contrary, in the event of a devaluation of the yuan due to US sanctions or a new introduction of restrictions in the country, digital money should only win.