The coronavirus that causes the infectious disease COVID-19 causes a lot of harm worldwide. Not only the health of people is affected, but also the economy is suffering tremendously as people are forced to stay home and consumer confidence is low. In other words, the economy is taking hits and the result is plummeting stock and commodity prices.
The negative oil price
When it became clear that the coronavirus wasn’t gonna go away, the World Health Organization (WHO) declared a pandemic. Soon after, markets across many industries worldwide reacted by crashing prices. Also bitcoin (BTC) saw a historic drop from around $9.500 to under $4.000. Another commodity that took a big hit was crude oil. As airlines canceled most of their flights, demand for fuel became almost non-existent.
At the end of February of this year, one barrel of crude oil was sold for around $54. One month later the price crashed towards $0 and even -$38. Yes, you read that right; minus $38! The reason why the price was less than zero is that investors wanted to get rid of their contracts, as the contract makes you liable to accept the underlying commodity. In this case, that means you will have to find a place to store your oil, and as all oil storages were already full at that point this could mean trouble for investors with these contracts.
How bitcoin (BTC) miners can profit
While the plummeting oil prices meant big losses for many investors, there is a group that can profit from it; bitcoin miners. Especially the miners that are located in the United States of America, where miners get 36% of their energy from petroleum, can mine more cheaply now that oil is so cheap.
In a recent video, Bitcoin expert Andreas Antonopoulus explained that it is no coincidence that big mining corporations set up shop in the USA:
“One of the biggest new mining operations opened in the United States in the state of Texas and I can’t imagine that that is a coincidence […] It is the largest oil producer in the world because of fracking. Therefore, there may be really good opportunities for cheap power, which would suddenly make U.S.-based miners much, much more competitive and profitable.”
What he is saying is that especially miners in the US may suddenly become more profitable in comparison with, for example, China. This may cause a shift of power in the world, where China has been the number one hash rate producer for a long time. Therefore, it will be interesting to see this situation unfold in the coming months.