The risk of the second wave of COVID-19 has increased: why bitcoin will no longer fall by 50%

Virologists predict that COVID-19 will return to Russia, and in Europe and the United States the incidence is growing again. How this will affect financial markets, wait for a new fall and which assets will suffer the most

A second wave of coronavirus may come to Russia, said Mikhail Shchelkanov, head of the laboratory of microbial ecology at the DVFU School of Biomedicine. According to him, in two weeks the country will experience a "surge that is observed in European countries." In March, the spread of COVID-19 led to a fall in the value of stocks, oil and cryptocurrencies. This time, however, the assets may react differently to a new increase in disease in the world.

If the picture is similar to the March events, we can expect a decline in indices, but it is unlikely that the depth of the fall will be as large, believes the financial analyst of the investment company Raison Asset Management Nikolay Klenov. If the lockdowns are repeated, the shares of oil companies, airlines, non-food offline retailers, etc. will go down sharply, the expert warned.

"However, investors who have been taught by the spring fall will be able to better predict the fate of assets and will not sell everything in a row. The supporting factor will also be new infusions of liquidity, which, judging by the statements of regulators, no one intends to stop," Klenov explained.

What is the reason for the surge of coronavirus in Europe and the United States

Experts in the field of virology interviewed by RBC said that the country may have a re-growth of the disease. For example, Alexander Chepurnov, a leading researcher at the Institute of Clinical Experimental Medicine and a professor of virology, said that this is evidenced by a similar situation in other countries.

"For me, even here more than Europe, is an indicator of the United States, because they had a very large number of cases, then a very confident decline (and now) that they are now back to the peak that they had," the expert said.

He added that a spike in coronavirus in Europe and the US could be linked to people's fatigue from quarantine measures and "international relaxation." According to Chepurnov, the new COVID-19 outbreak is most likely in major transport cities with large populations.

On 25 June, it was reported that 30 European countries had reported an increase in new cases of coronavirus infection in the past two weeks. WHO Regional Director for Europe Hans Kluge warned that this threatens a new spike in disease that could lead Europe's health systems to crisis.

How restrictions due to COVID-19 affected interest in cryptocurrencies

Against the background of self-isolation, many crypto-exchanges, such as Binance, EXMO, Garantex and others, reported an increase in customer activity, an increase in trading volumes and the number of registrations. After the restrictions are lifted, traffic on platforms has decreased slightly,but this may also be due to the fact that the summer months are considered weak for financial markets.

Some sectors of the real economy have been experiencing active growth since the beginning of the pandemic, said Dmitry Kravchenko, CEO of Acer in Russia. In particular, the demand for computers and laptops continues to grow. At the same time, if the second wave comes, the stock market will certainly face a negative correction, the expert believes.

The decline in interest in the cryptocurrency is also affected by the narrow price range in which bitcoin has been squeezed in the last two months. Since the beginning of May, the cryptocurrency has been trading in the range of $9,000-10,000. Now its price is $9121, for the past 24 hours it has increased by 0.53%. However, low volatility over a long period of time often leads to sharp price spikes.

For example, in September last year, two days after the cryptocurrency's volatility reached a low, its price fell from $10,000 to $8,000. And at the end of October, after several weeks of calm, the BTC rate first fell from $8200 to $7,000, then sharply exceeded $10,000.

Against the background of low volatility and risks of the beginning of a new wave of coronavirus, probably, the price of bitcoin will change dramatically in the near future. Either the cryptocurrency will manifest itself as a protective asset and will rise in price against the background of new global shocks, including economic ones, or will become cheaper, as well as other risky assets.

How the price of bitcoin will change in the coming months

Viktor Pershikov, a leading analyst at 8848 Invest, explained that the second wave of COVID-19 will definitely affect the Russian economy and the world as a whole. The expert suggested that financial markets may again be under pressure, as there is no significant recovery of the economies yet.

"I do not expect a big drop in alternative investment instruments such as bitcoin and altcoins. Undoubtedly, the correlation with the stock market and the U.S. at the moment and the general tension can bring the price of BTC to the level of $8000 in the coming days, but there is no fundamental negativity within the sphere of cryptocurrencies. I continue to wait for BTC at $14,000 until the end of the year," Pershikov predicted.

He added that the properties of the protective asset, which bitcoin demonstrates during the second year, will allow it to lose less in value than other assets against the background of a possible second wave of the pandemic in the second half of the year. However, in March of this year, the value of BTC collapsed along with the index of the S'amp;P 500, which fell to a local low of 2,237 points, while gold prices reached a seven-year high of $1700. Analyst Klenov warned that the collapse of bitcoin could happen again if the big holders again arrange a sale of the coin, then buy at lows and cheaper shares.

"In my opinion, this was the case in March, as bitcoin and stock market quotes are not related to each other by fundamental economic indicators. The fall in assets should not occur at the same time, so it is difficult to predict the movement of the course on the news of the pandemic," Klenov stressed.

The risks of the spread of the second wave of COVID-19 coupled with the low volatility of bitcoin over the past two months may indicate that in the near future the value of the cryptocurrency will abruptly come out of the corridor $9000-10,000. However, experts do not believe that cryptocurrency can prove itself as a protective asset and rise in price against the background of economic instability. According to experts, bitcoin is more likely to become cheaper, but not as much as it happened in March this year.