The 2019 Novel Coronavirus (2019-nCoV), more commonly referred to as the coronavirus and the Wuhan Virus, is sending shockwaves through the global economy. Indeed, there have already been major market movements that can likely be connected to coronavirus news, so it is important to understand the economic impact of the coronavirus, and where it will go from here.

First off, Bitcoin (BTC) has surged during the time that the coronavirus has been in the news, essentially since the beginning of the month and the first reported case on New Year’s Eve. So far, since Jan. 2, Bitcoin (BTC) has risen from $6,900 to $9,300, which is a 35% rally. As the coronavirus news crescendoed in the past week, Bitcoin (BTC) gained over $1,000.

It is important to note that the Bitcoin (BTC) market is a highly non-linear system, so it is impossible to say with certainty that any price rise or fall is due to a particular fundamental, such as the coronavirus.

That being said, Bitcoin (BTC) is considered to be a safe haven asset, which means that it is an alternative investment option if the traditional financial markets are experiencing weakness. Gold is one of the top safe-haven assets, and gold has risen 3% in the past month. Bonds are perhaps the most popular haven asset, and bond yields have been steadily decreasing which indicates more investors buying up bonds.

So we can make a case that investors worldwide have been rushing into safe-haven assets, including Bitcoin (BTC), due to the coronavirus. This makes sense since the coronavirus has the potential to cause serious economic damage.

Basically, a dangerous virus can slow down the economy in multiple ways. If the virus is bad enough, countries start to close down their borders, stifling international trade. Already, Hong Kong, North Korea, Mongolia, and Malaysia have closed their borders with China.

Also, the air travel industry could experience a big financial hit, due to air travel bans between China and the rest of the world. Some countries have issued travel bans, and there is talk that the United States could ban all flights originating in China. Corporations are taking action too, American Airlines, Germany’s Lufthansa, Air Canada, and many other airlines have made the decision to stop serving mainland China until this situation clears up.

Aside from the impacts on international trade and air travel, in areas where the virus cases have been found retail sales, work productivity, and transportation are likely declining significantly. Basically, people want to stay inside if the coronavirus is a threat in their city, rather than shopping, going to work, or taking an Uber anywhere.

Indeed, in areas where the coronavirus is particularly prevalent, the Chinese government has initiated a quarantine, which includes at least 15 cities and over 40 million people. There is no transportation in or out of the quarantined cities, and retail sales have plummeted, especially since stores cannot even restock.

Beyond the quarantined areas, China has extended the Chinese New Year into early February so that no one goes to work or school, in order to reduce coronavirus transmission. Essentially, the economy in all of China is significantly reduced for the foreseeable future. Apparently, even if the coronavirus can be stopped relatively quickly the Gross Domestic Product (GDP) of China will significantly decline due to the economic damage that has already occurred.

Due to these economic impacts, stock markets in the United States have been shaky, with the Dow Jones Industrial Average losing nearly 500 points on Monday. Stock markets in Europe and especially in Asia have been doing even worse. Notably, Chinese stock exchanges continue to be closed for the Chinese New Year, so the impact of the coronavirus on equity prices in China has not been priced in yet.

So the coronavirus has already negatively affected the economy in China, with the Chinese economy basically paused. Beyond China, countries are beginning to close borders and ban air travel from China, which results in negative economic effects in the broader international economy. These negative economic effect cause equities to decline, and increase investment in safe-haven assets like Bitcoin (BTC), precious metals, and bonds.

Going forward, each bit of information on the coronavirus outbreak has the potential to impact the market, so Bitcoin (BTC) traders and investors should closely monitor the news. If the outbreak worsens, it seems likely Bitcoin (BTC) will continue climbing. If it ends or is not as bad as first expected, Bitcoin (BTC) could fall from safe-haven investors rushing back into equities.

Ultimately, we must wait and see how the coronavirus outbreak will impact the crypto and financial markets in the short to medium turn, but it seems no matter which way the situation goes there will be significant market movements.

Author’s Note: The loss and destruction of the coronavirus outbreak, particularly in China, is extremely sad, and my prayers go out to all victims. I also pray it gets no worse. This article should not be interpreted as saying Bitcoin going up from this virus is a good thing. Rather, I am documenting the economics of this, which is critical because the coronavirus outbreak has been one of the most important factors in the market this week.