Coronavirus Could Be 'Black Swan' That Kills Bitcoin, Cryptocurrency: Here's Why

With the Fed making an emergency rate cut on Tuesday in response to the growing coronavirus fears which now poses a risk of the U.S. and other countries going into recession, many believe that the virus could be a "black swan" event that would impose negative effects to the global economy.

The stock market, although surging higher yesterday thanks to coordinated responses to the virus and a strong performance from Joe Biden, it did suffer its worst week last week since the 2008 financial crisis. The Dow dropped 12.4%, the S&P500 fell 11.5%, and Nasdaq shed off 10.5%. And, surprisingly, despite the rate cut, the market responded with massive selloffs before the uptick on Wednesday.

Over at the crypto-verse, there is also the same concern of a black swan event triggered by COVID-19 trickling to the nascent market that imperils Bitcoin and other cryptocurrencies. "Black swan" is a term coined by Lebanese-American scholar, statistician, and former trader, Nassim Nicholas Taleb, and it refers to sporadic events that no one could have foreseen coming and have a severe impact to society and the economy.

Bitcoin (BTC) is still considered a risky asset despite plenty in the crypto space asserting correlations of the leading crypto to macro events, which appear to have been coincidental after all. Indeed, BTC traded higher in January amid the U.S. and Iran conflict, and during the reopening of trading in the Chinese market in February, but investors didn't seek safety in the top crypto last week as its decline was sharper than the three major stock indexes.

A black swan, according to Matthew Hougan, the vice president of Bitwise, could accentuate more of BTC's pitfalls like the lack of regulation and clampdowns on crypto trading on certain exchanges could seriously dampen prices.

And even if it's designed to be "recession-proof," some believe that it's still too early for BTC to survive such a drastic event. Still, there are some positive aspects to look at a black swan due to the coronavirus that Heather Morgan, founder of SalesFolk, highlighted, including a wakeup call for the healthcare system in the U.S., for people to be more prepared for such instances, and most importantly, a correction that the stock market badly needed.