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Top 3 cryptocurrencies impacted by the coronavirus

The three most lucrative blockchain tokens – namely Bitcoin, Ethereum and Ripple, are struggling to return to the highs of February, with investors preferring to stay clear of 'risk' assets.

As the coronavirus outbreak escalates in severity and major global economies go into isolation mode, a less discussed and apparent victim of all this uncertainty and volatility has been the cryptocurrency market.

On Thursday 12 March – the day that the World Health Organization (WHO) declared the coronavirus a pandemic – markets everywhere crashed as investors and traders rushed to liquidate their riskier assets, including the likes of Bitcoin and Ether.

Crypto prices have since retraced slightly but based on the sideway pattern so far this week, it appears that the market is struggling to find back some of its form from earlier this year.

In this article, we take a look at how the three most popular digital currencies have performed since late-January – around the time that the coronavirus started to spread outside its place of origin in Wuhan, China.

Read also: What's the Bitcoin price outlook in 2020?

1. Bitcoin: ↓39.5%

Bitcoin's (BTC) price was hardly fazed at the onset of the coronavirus spread in late-January, as the digital gold had in fact pushed upward to a six-month high price of US$10,480 per coin in mid-February, probably benefitting from the initial market volatility.

Everything was going well until 12 March, when BTC suffered its biggest one-day drop in the last seven years, plummeting over 50% to US$3,600 overnight, as panic surrounding the coronavirus reached a fever pitch, sending investors into a mad dash for cash.

Earlier that day, the US government had imposed a 30-day travel ban on 26 mainland European countries within the Schengen border-free travel zone, in addition to WHO’s escalation of the virus’ status.

BTC’s drop looks even more frightening, when you compare its fall to that of the S&P 500 index and Dow Jones Industrial Average – two of the most closely-watched indexes in the US with a great deal of influence on markets. In fact, analysts say that bitcoin’s collapse was partially triggered by the two US benchmark’s respective declines of nearly 10% on said day.

Other geopolitical conflicts – namely the Saudi Arabia-Russian oil price war – also added to the crypto market’s problems, said cryptocurrency trader and technical analyst Eric Thies.

He further noted that unlike the last price rout in late-2018, institutional investors now form a significant portion of bitcoin ownership – thanks to an accumulation phase at lower prices that first started in early 2019. This meant that the coronavirus ‘is the first market cycle where the weight of the money’ lied with institutions.

‘That means that Bitcoin is now tied to the traditional markets, and far from being a safe haven when it comes to the emotional cycles of humans, and our instinct to save our money when we become fearful,’ he explained.

BTC has since retraced some of those losses, but remains at around US$5,177 per coin as at 9am GMT on 18 March – nearly 50% below February’s high of US$10,481.

Buy long or sell short on Bitcoin, Ethereum, Ripple and other cryptocurrencies by trading CFDs on IG's market-leading trading platform. Open an IG account today.

2. Ethereum: ↓40%

Ethereum (ETH), the second most valuable cryptocurrency by market capitalisation, has been harder hit by this current wave of coronavirus-inspired selling. The crypto – the second most traded on IG - is down a hefty 61.24% from February’s highs of over US$285 as of 18 March.

As the pandemic caused panic selling to pick up steam, Ether whales – who account for over 30% of all ETH accounts versus 20% for bitcoin, according to cryptocurrency data research firm Chainalysis Insights – are once again on the receiving end of the blame for this latest devaluation.

Santiment, another crypto data analysis company, had tweeted on 04 March that the top 100 Ethereum holders – effectively the ‘whales’ mentioned above – were starting to accumulate more ETH for long-term holding, which is often a sign of positive things to come.

Less than a week later, however, the Santiment researchers changed their tune. They came to the conclusion that the same Ethereum whales who they thought were boosting Ether prices, had in fact started dumping their ETH assets both in the lead up to, as well as after the massive cryptocurrency collapse that occurred from 07 March onwards.

This heavily suggests that the whales had a part to play in Ethereum’s steeper-than-market-rate fall, although they were also perhaps themselves pressured to sell to cover losses elsewhere.

Still, to be fair to the whales, Chainalysis researchers have their own take on the subject, stating that while these power players control a lot of Ether and can cause intraday volatility, they do not actually impact overall prices that much.

ETH is currently trading under US$113, based on IG trading data – a 39.9% drop from late-January.

3. Ripple: ↓41.9%

Ripple (XRP), the third most traded crypto on IG and the third most valuable digital currency on the market, has suffered the sharpest decline since late-January.

The price of one XRP token stands at US$0.1441 each currently – much lower than the top two cryptos, as there are over 39 billion XRP coins in circulation. Still, XRP is extremely popular for its low entry price, immense potential, large market capitalisation (nearly US$7 billion), and the fact that it is governed by one centralised body called Ripple Labs.

The ripple effect is certainly a realised phenomenon when it comes to the pricing of XRP, similar to Ethereum. Both currencies, along with the wider blockchain money industry, tend to take their trading cues from bitcoin.

XRP, unfortunately, has also been a victim of the coronavirus-driven crypto price crunch. Between 07 March and 13 March, the coin stumbled over 39% - the largest one-week drop since November 2019.

While analysts say this is a good time to buy in and stock up on XRP, the crypto market’s overwhelming volatility and uncertainty continues to keep investors and traders away, as evident by XRP’s inability to make any upward progression and solidify any higher highs.

With this wait-and-see approach, it is difficult to tell when things will turn around for Ripple – along with Bitcoin and Ethereum – but any move past US$0.16 in the coming days could signal that a recovery is now underway.

Buy long or sell short on Bitcoin, Ethereum, Ripple and other cryptocurrencies by trading CFDs on IG's market-leading trading platform. Open an IG account today.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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