The bubonic plague in China: how it will affect the economy and bitcoin

In the autonomous region of Inner Mongolia, an elevated threat level has been declared by the end of the year. In the country, which is preparing to issue a national cryptocurrency, there are more than half of bitcoin mining companies

China has declared a third level of epidemiological danger due to a patient who has confirmed bubonic plague. The disease was also found in two Mongolians, one of whom was already sick directly contacted 60 people and indirectly - with 400. China is a major market for cryptocurrencies, there is a significant part of miners, and the authorities are preparing to release a national cryptocurrency - the digital yuan. Therefore, any global events within the country can potentially have an impact on the value of the new type of assets.

The Level 3 warning, which was issued in Bayan Nouri, prohibits hunting and eating of animals, possible vectors of the plague, and encourages the public to report any suspicions of plague or fever without clear reasons, as well as any sick or dead groundhogs. Forbes writes that from time to time the plague appears on all continents. In the United States, for example, an average of seven human plague cases have been reported annually since 2000. However, the disease does not spread like COVID-19, because in this case there have long been ways of effective treatment. Overall, 26 cases of plague and 11 deaths were reported in China between 2009 and 2018.

Despite the bubonic plague, Chinese stocks continue to rise in value. Now there is a V-shaped recovery. This is happening against the background of weakening risks of Chinese industry due to the opening of markets in the United States and Europe. For example, today, July 6, the Shanghai Composite index updated the highs of April 2019, it has grown by 5.71% since the beginning of trading, the growth was one of the strongest in a single day, since 2015.

"The general reason for such sentiments could be fiscal and monetary stimulus adopted in the wake of the COVID-19 pandemic, as well as the fact that the Chinese market could get support from positive macro statistics - for example, for June 2020, the Caixin China PMI services index rose from 55 to 58.4, which is a multi-year record of growth in the month-to-month period. In addition, market participants note the increased activity of Retail investors. The latter, faced with a decline in yields in many other instruments, are increasingly turning to the stock market," explained Mikhail Smirnov, an analyst on international markets at General Invest.

He warned that not all chinese market rallies were sustained or stable. If the epidemiological situation deteriorates further, if restrictions on people's movement and business activity are reintroduced, shares of companies from China can become much cheaper, Smirnov warned.

How cases of bubonic plague can affect mining

Among the Chinese companies whose shares may suffer, there are also large manufacturers of equipment for mining. For example, Canaan, which last November held an IPO on the Nasdaq exchange and raised $90 million, as well as Ebang, which sold 19.3 million shares worth $101 million. Despite the gradual decline, the share of Chinese miners in the total hashre bitcoin remains extremely high.

According to the analytical company TokenInsight, at the end of April this year the figure was 65.08%, and in September 2019 it exceeded 75.63%. For comparison, in the U.S. 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 someone thinks hysterically to buy bitcoins, then locally it will have an effect, but there are no preconditions for a serious change in the price at the moment," said Sergey Troshin, CEO of the Six Nines data center.

If China strikes a major new virus, which will lead to quarantine, the authorities may decide to close mining plants and farms. However, cryptocurrency mining is quite a standalone business, which does not require a lot of people. During the quarantine at the beginning of the year, many businesses continued to operate and employees lived directly on farms.

"If the mining plants stop, bitcoin will fall. There are no significant threats to the cryptocurrency market at the moment. Even coronavirus at a significant rate of recovery could not seriously affect the work of cryptocurrencies. For some time the risk hangs over traditional payments due to quarantines in bank offices, but not over decentralized currencies. It is unlikely that the plague poses a danger to the huge Chinese economy, and even more so for cryptocurrencies," Troshin explained.

Why the release of the digital renminbi does not depend on the epidemiological situation

The topic of the national cryptocurrency is actively developing in China. Last week, the consulting company BlocksBridge reportedthat the second most popular taxi app Didi could become the first private company to start accepting a national cryptocurrency.

We are talking about the digital yuan, which is being prepared for issue by the People's Bank of China. Now the regulator assesses the stability and practical value of the national cryptocurrency, as well as the convenience of use, the possibility of application on various sites and risk control. Now the development, creation of standards, feature research and integration testing have been completed. However, the timing of the release is unknown.

"The only case of morbidity will not affect the plans of the billion-dollar country in the field of cryptocurrencies, especially the launch of the digital yuan. The Chinese authorities are monitoring the matter. Of course, any report of morbidity in China today is very acute, given the fact that the first outbreak of coronavirus occurred in China," said the head of data analysis at CEX. IO Broker Yuri Mazur.

In the first quarter of this year, the People's Bank of China was forced to postpone the program to develop a digital yuan. The reason is quarantine imposed because of coronavirus, which has affected government agencies. The issue of the national cryptocurrency is also necessary in order for the country to be able to resist American sanctions.

How U.S.-China differences could affect bitcoin exchange rate

At the end of June, the National People's Congress (NPC) passed a law on national security in Hong Kong. The new rules, which were actively opposed by the American government, began to operate on July 1. Robert O'Brien, the US President's National Security Adviser, warned that sanctions would be imposed on Hong Kong and China if the document was adopted.

Last year, when the U.S. imposed sanctions on the DPRK, the yuan weakened. As a result, Chinese investors began to use cryptocurrency as a protective asset against the devaluation of the national currency. The demand for the digital coin was so great that users paid up to $300 for the deal as a premium.

"With the fall of the national currency, the demand for cryptocurrencies, such as bitcoin, traditionally increases. In the event of a pandemic, there is a growing demand for contactless virtual payment tools because people do not want to touch money physically. If both scenarios happen simultaneously, the whole range of cryptocurrencies will be in demand," said Grigory Klumov, founder of the stable cryptocurrency platform Stasis.net.

According to him, now there is a paradigm shift. The pandemic has prompted a rethink of the need to be in office. If earlier people were afraid to enter the card number on the Internet, now it is a standard procedure. Psychologically, the world is increasingly opening up to the adoption of the concept of cryptocurrencies.

Bubonic plague occurs almost every year, and the case in Bayan-Nur has not been considered the most dangerous. Experts believe that this event is unlikely to pass into something more serious, as at the moment people have learned well to defend themselves against this disease. Experts believe that cryptocurrencies are not threatened at this stage. On the contrary, in the event of a devaluation of the yuan due to U.S. sanctions or new restrictions in the country, digital money should only win.