The only thing that matters in cryptocurrency right now is the virus

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Steve Sokolowski
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The only thing that matters in cryptocurrency right now is the virus

Post by Steve Sokolowski » Sat Feb 29, 2020 10:31 am

A few months ago, I predicted that each of the SHA-256 cryptocurrencies would reach a high a month or two before the halving, and then see a few months of stagnation until coins continued their traditional path of becoming more valuable over time. That's why Chris and I believed that the $10,200 mark on February 18 was the "second lower top" that is often seen after trends change in cryptocurrency markets.

In the last week, of course, the virus outbreak has caused a freefall in the stock market. Despite everything in the news, a lot of the discussion websites and forums are trying to explain current price trends using technical analysis (TA) with lines on charts, or they are trying to use internal events (like the halving) as an explanation of bitcoin's (and other coins') price action. It is true that internal events started this fall, but the market has since been "overcome by events," as technical writers often say. Anyone who is buying or selling any asset needs to understand that the coronavirus is the only thing that matters right now.

The effects of the virus are likely to be a catastrophe that people will use to divide their lives into time periods. For many people alive now, they can point to certain events as turning points in history. Some critical historic turning points that the oldest of us will remember would be World War II, the Cuban Missile Crisis, the fall of the Berlin Wall, 9/11, and now (likely) this viral outbreak. (There are other important events, like the moon landings, which were historic but did not change how most people lived.) Since 9/11 is the newest event on the list, most people can remember how September 10 was a normal day, and then everything was cancelled for a week after. TV networks didn't even resume normal programming until two weeks later. With this virus, people will remember where they lived and what they did, particularly during March when the fear will be highest. There will likely be permanent changes in human behavior - for example, in ten years, people may no longer shake hands to greet each other. There will probably be a treatment for all viruses and most other disease ten years from now, but shaking hands will just be something that people don't go back to doing and eventually people will forget why the tradition changed.

If the virus spreads widely, as is now the most likely scenario, everyday life will be changed for a prolonged period. We can look at other areas of the world that have already experienced outbreaks for precedent. In Venice, for example, even though the city itself isn't in the epicenter of the outbreak, tourism has ground to a halt. There are pictures of empty streets and restaurants. In China, even people who were not quarantined holed up in their apartments for weeks. In South Korea, events are being cancelled. The poor economic outlook is absolutely warranted.

And that doesn't even consider secondary effects. For example, the government in Iran is fragile and could fall if it doesn't get the virus under control. Trump could use the pandemic to seize further power by, for example, by signing an executive order to halt all immigration, something many Republicans would approve of. Or, if the virus mutates to be extremely lethal, he could use it as an excuse to postpone the election, as dictators in many other countries have done.

If someone were to design a virus to be the perfect black swan event, this would be it (and there are certainly plenty of conspiracy theories on the Internet about that.) The virus has a long incubation period, children may be carriers without being sick, and it kills a lot of people but people are well enough to travel for 7 to 9 days before hospitalization. The virus's immunity may only last seven days, and there may be biphasic illness. Asymptomatic carriers may infect chronically ill people, who develop critical disease. Dogs may be able to be infected, although the evidence remains unclear on that. But the most concerning fact, and the one which does not get a lot of attention for some reason, is that 20% of people require hospitalization, and 10% end up in the ICU. Perhaps I'm not like most people, but a sudden heart attack isn't that bad compared to unbearable suffering in the ICU for weeks, or (as is the case in Italy) suffering without treatment when the ICU has no beds left.

I talked to someone recently who wasn't following the news, and that person had little idea what was going on. People don't seem to understand that caring for sick people means that two people can't go to work, that some goods will simply become unavailable, and that some industries may be nationalized to produce medical supplies. Therefore, it seems to me that most people have yet to understand the scope of what is about to happen, and it follows that the situation is not "priced in" yet. There is little bulk buying, which is a good thing for society of course, but the lack of stocking up on reasonable supplies is at odds with the likely outcome. (There are idiots wasting money on masks, which may indicate that people are buying useless items and that's why nothing I bought was out of stock.)

I don't believe the projections that 50 million will die from the virus. People modify their behavior based upon acceptable risk. While driving, they drive fast on straight roads with newer cars and slower on narrow roads with an older car, regardless of the speed limit. Likewise, if the virus turns out to be very deadly, then people will stay at home until a cure is available. If the virus is not very deadly, then people will take fewer precautions. And if the virus turns out to be the worst catastrophe in the history of the world, then the "12 month" estimates for vaccine development will be scrapped in favor of direct testing in humans, because any deaths caused by the rushed testing will be worth the lives saved by moving the vaccination campaign a day forward. Due to human management of risk, the number of deaths will be about the same regardless of the virulence of the virus.

The market reaction is going to be dictated by what people think, not by the actual effects of the virus. A recent study found that 27.5% of Americans are already cutting back on visiting public places, even though the risk of contracting the virus was precisely zero at the time (and is still minimal). For most of history, people lived with viruses like smallpox, polio, and measles; the only reason this virus is particularly feared is because some people weren't alive in the 1960s, when these more damaging diseases were still in circulation. On the other hand, in 2040, when nobody gets a cold anymore, people will be afraid to go outside if any virus at all is around. Thus, once the overwhelmed hospitals are no longer on the front page, the new way of living will just become normal.

Bitcoin is not immune to the effects of the virus. The virus will be so transformative to people's daily existence that there is nothing else in the next few months that should be considered to matter for any asset. For now, what coin developers are doing or when halvings are occurring are overwhelmed by concerns about the virus. The virus should be seen as a hurricane that affects the whole world. When a hurricane is approaching, people are buying wood to board up their windows, not following the price of bitcoins.

Now that I've discussed the virus and psychology, I think that the way the situation unfolds is likely to be something like this: there will probably be a bounce in both the traditional and crypto markets, or maybe a short-term stemming of losses, over the next few days as some people think that the scope of the selling last week was overblown. That will especially be true if people do the count and realize that out of all the people in Hubei province, less than 0.1% actually contracted the virus, and there will probably be less than 1000 Americans having contracted it.

But then the first major sporting event will be cancelled - I suspect it will be the NCAA basketball tournament - and the news coverage over that will create the real panic. Images of people buying food will cause others to go out and buy more food. Even if the virus eventually turns out to be mild, the leagues could incur legal liability by hosting these events. Then, three weeks from now, with no basketball to watch, people will instead go to the stores and buy both useful items (like nonperishable food) and quack items (like herbal supplements.) Another dynamic to watch that I've noticed from talking to people is that parents seem to be really worried about schools; I talked to someone who discussed withdrawing his child from school before the schools close. Perhaps some schools will need to close due to low attendance, rather than an actual outbreak.

Then, a few months later, a drug is likely to be found that can reduce the risk of death. Because most people appear to be concerned about death, rather than about suffering, the availability of this drug will restore confidence in the markets even if it still takes 30 days to recover from the virus. Bitcoin will be past its halving by then, and when people see a glimmer of hope that life will return to normal, we could see a surprise surge past $10,800 to finally end the bear market that has continued since June 2019. When the vaccine is ready, it will receive a passing mention in the second half of the evening news, and people will continue to die from the virus for years because they refuse to get the vaccine.

Before February 18, we had been accumulating coins, mostly bitcoin cash, after it was mined. Over the past two weeks, we sold about $150,000 in coins and set the pool to auto-sell everything we don't owe customers to dollars. If there is a bounce this week or next due to some good news (or simply due to exhaustion), we will not change this behavior. The worst in all markets is yet to come, I expect bitcoins to be worth $7700 or less, and this is the only time I can recall when panic selling is actually warranted. But it's important to be ready for the surprise news that an effective drug was found, or that the number of infections seems to be slowing due to warm weather. I will move out of "panic sell" mode a few weeks after those first sporting cancellations occur. Hope is a powerful emotion, and you don't want to miss out on the sudden spike when people start buying the day hope returns. There is also the possibility that, while people are indoors this Spring watching the stock market do poorly, any rise in bitcoin price could lead to a runaway mania because the viral recession or depression is causing traditional stocks to offer no returns.

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By the way, if you're wondering what I did, I spent about $1500 to buy things that I will use anyway, like 20 person-weeks of Huel, 100 rolls of toilet paper, 4 months of prescription drugs, and so on. Then, I'll go on with daily life. If nothing happens, I'll just have enough tissues to last a year. People should be worried about the supply chain disruptions and drug shortages, not about actually contracting the virus.

After all, 50 million people die every year from aging, which shows where the research should be spent. This virus makes news because young people have died, and the death of an old person is not seen as a tragedy.
cc4506
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Re: The only thing that matters in cryptocurrency right now is the virus

Post by cc4506 » Mon Mar 02, 2020 10:46 am

I think the last two paragraphs sum it up. Could the virus become more lethal or combine with something else? Absolutely but for now that has not happened.

The flu kills approx. 250k every year world wide and about 36k in this country, compare that with this so far.

Is this going to be dangerous to the elderly and those who are already compromised, yep. But for most of us its a bad cold or flu.

My worry is not the virus but irrational fear. I have experienced it, lived it - the veneer of civilization is wafer thin. And it left its mark, which is why I live in MT.

For now thou keep calm and chive on!
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Steve Sokolowski
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Re: The only thing that matters in cryptocurrency right now is the virus

Post by Steve Sokolowski » Mon Mar 02, 2020 11:20 am

cc4506 wrote:
Mon Mar 02, 2020 10:46 am
I think the last two paragraphs sum it up. Could the virus become more lethal or combine with something else? Absolutely but for now that has not happened.

The flu kills approx. 250k every year world wide and about 36k in this country, compare that with this so far.

Is this going to be dangerous to the elderly and those who are already compromised, yep. But for most of us its a bad cold or flu.

My worry is not the virus but irrational fear. I have experienced it, lived it - the veneer of civilization is wafer thin. And it left its mark, which is why I live in MT.

For now thou keep calm and chive on!
It is true that the flu is a greater problem for now. But there are two issues that I think you're missing.

First, the flu is generally either a mild illness or a fatal one. This virus causes 20% of patients to be hospitalized and 10% end up in the ICU. The true death rate will be far higher than 3% once the ICUs are full and they turn away less sick patients and some of those patients die in the waiting room, as happened to four patients in Italy yesterday already.

But more importantly, you used the words "for most of us." While I understand you had the best intentions in saying that, it is not OK that "most of us" will be fine. Older people and sick people are worth just as much as you or I are, and their deaths are just as horrible as a young, healthy person's death. Some people in the media are trying to downplay the threat with statements like "if you're healthy, you'll get over it just fine." That statement should not be reassuring to anybody.

You are right that most people will not contract the virus, and that the greatest threat, at least for the next week, is panic and unpreparedness. There are people who don't even know the basics about how viruses spread and where the greatest risks are. The people who flooded Costco this weekend to buy masks, hand sanitizer, and toilet paper are going to be surprised when they find they don't have any Soylent, water, or prescription drugs in a survival situation. But at least they'll have ineffective masks, plenty of toilet paper, and buckets of sanitizer in the closet to use on their hands to kill nothing when they are alone!
cc4506
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Joined: Wed Mar 28, 2018 10:07 am

Re: The only thing that matters in cryptocurrency right now is the virus

Post by cc4506 » Mon Mar 02, 2020 2:38 pm

Steve, don't misinterpret "most of us" as meaning its ok. Its not, but it is a fact. We shouldn't like it, do our best to help out where we can, but ultimately those whose systems are already compromised are going to be in trouble. No question. But my point speaks directly to yours. Since we know the most fragile we want to concentrate out recourses there. If everyone who gets a runny nose runs to the hospital our system will be overwhelmed and it will break down.

If you don't have to go to a hospital DONT! Especially in a pandemic.

Now that's its in the "wild" and out of China we will get some true stats and can see how lethal it is and what the hospitalization rates are as well.

As for me I volunteer at the hospital already and was asked if I would come if necessary. For any of you who can there are a lot of ways you can help such as the Red Cross and it doesn't require too much. Help out where you can, stick together, work together and we will come out of this as best we can.
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Steve Sokolowski
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Re: The only thing that matters in cryptocurrency right now is the virus

Post by Steve Sokolowski » Tue Mar 03, 2020 2:03 pm

I think that it's possible this could be one of the last pandemics that ever hit the world, as technology is advancing towards the point where it will be possible to cure any disease. If there is any positive effect from this disease, it may be the development of systems that can create vaccines for any virus very quickly. There is actually a company that claims that it is close to an "in-field" hardware and software platform that can take viruses and create vaccines quickly.

It's important that such a platform be developed before it becomes easier for the average person to create a new disease as a biological weapon. It's already possible to spend $100,000 and create the smallpox virus.

Until an automated vaccine platform becomes available, I expect that pandemics are going to become a way of life. There's a reasonable possibility that this sort of indoor lifestyle becomes a necessity, perhaps from 2023-2026, until the threat of pandemics is permanently ended.

I also think that it's likely that with so much research going into drug discovery, within a month or two we will probably have a drug that treats not only this virus, but also most common colds. That's another disease that has been a scourge to civilization for centuries, and probably has caused more suffering in total than this pandemic has.
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