On February 29, 2020, I wrote a post titled "The only thing that matters in cryptocurrency right now is the virus." In it, I argued that the Wuhan coronavirus, as it was then referred to, was by far the most important factor that would define the trajectory of cryptocurrencies over the coming months.
In the end, a generational buy opportunity did present itself on March 13, with bitcoins dropping below $4,000 for a few hours. Unfortunately, I could not get money from the legacy banking system into an exchange quickly enough. With history repeating itself as another virus comes to the forefront, I'm not going to make the same mistake.
What's written in this article is probably not going to age well, so if you're reading this in 2023, the content is either going to sound stupidly wrong, or the background information below is going to have been repeated in the news so often that it sounds like it was written for a five-year-old. Nevertheless, I'll still provide some basic information for contemporary readers.
An overview of monkeypox
Monkeypox is a virus, related to smallpox, which survives in animals in Africa and which, before 2022, was most often transmitted to humans when they came into contact with infected animals. There are several strains of monkeypox; one has a fatality rate of 11%, while another (the "West African clave"), and the one involved in the current epidemic, is estimated to have a rate of slightly over 1%. By comparison, COVID-19 has a death rate of 0.6% in unvaccinated people, so the weakest monkeypox strain is about twice as deadly as COVID-19. Monkeypox also lasts far longer than COVID-19, with resolution of symptoms in 4 weeks.
There have only been 1500 cases of monkeypox known in recent history, so the virus has not been well-studied. Prior to 2022, epidemics always occurred primarily with animal to person transmission. An epidemic in 2003 infected 71 people who had close contact with animals from an exotic animal distributor, but there was no human-to-human transmission.
The symptoms of monkeypox include typical flu-like symptoms like fever, chills, and headache, as well as painful rashes that spread over most of the body. An image of a person infected with monkeypox is available at https://pbs.twimg.com/media/FTHnX2oXEAA ... me=900x900. The flu-like symptoms last for a few days or a week, and then the rash develops, becomes painful, and lasts for several weeks before beginning to heal.
The current outbreak
The current outbreak has infected at least 125 people in eight countries. Monkeypox was not extremely contagious in most previous outbreaks, but the speed at which the current virus is spreading indicates that something has changed. The first transmission occurred between gay men, leading some to believe there had been a mutation to make the disease sexually transmitted. That doesn't make sense anymore, as 45 cases were identified in a single day alone - one third of all the cases in the entire epidemic. Even with a 100% attack rate, it doesn't make sense that a sexually transmitted disease could have accelerated that quickly because there simply aren't enough people who have sex with multiple partners on the same day.
What prompted me to write this article today, is the news that a case was identified where there was no known contact with an infected person, indicating that community transmission has occurred for the first time. Monkeypox was thought to be airborne in the past, but close contact for a prolonged period was required. If community transmission from an unknown source has occurred, the virus must have mutated in some way, and the odds of a pandemic are now high enough to start making financial decisions.
Differences between monkeypox and COVID-19
This current strain of monkeypox is similar to SARS-CoV-2 in that both viruses had an ancestor that had each infected a limited number of people (the 2003 outbreak of SARS infected about 800 people, while there is history of about 1500 known infections of monkeypox.) Therefore, little is known about the exact strain circulating now. It's reasonable to assume that, because older people may have some immunity from smallpox vaccines, a large number of deaths from a monkeypox pandemic will occur in working-age people, and children will be the most vulnerable. For the stock market, that's worse than COVID-19, because older people were mostly affected by COVID-19.
It is also unknown if this new variant is as deadly as the previous monkeypox variants were. The transmissibility has obviously changed, so perhaps there are mutations that affect severity too. Some of the infected have already been hospitalized at multiple UK and US hospitals, but as with any illness, it takes a long time for people to die. Since monkeypox is a much longer disease than COVID-19 - symptoms last a month - it would be unlikely for there to be any deaths from the current outbreak regardless of the fatality rate. By the time the first death occurs, it will be too late to take any financial action because the markets will already have crashed, if they were going to do so.
Another unknown is when infectiousness begins during the extremely long incubation period of 12 days, which is far longer than that of COVID-19. If people are infectious for a long time during the incubation period, there could be 10,000 pre-symptomatic cases already, none of which will won't show symptoms until June.
How will people react?
Critical to deciding how to respond right now is predicting how people would react to a monkeypox pandemic. In March 2020, most people supported lockdowns and wanted to avoid risk. Many of those same people are now traveling without masks, willing to accept a much higher level of risk even though the risk of permanent damage from long COVID still remains the same, at around 33% of infections. I would imagine that this higher level of risk taking might translate into ignoring monkeypox, even if monkeypox is twice as deadly as COVID-19.
There is a critical difference between the two diseases - appearance. People can be infected with COVID-19, and be unable to work, but to others standing nearby, they look normal and might appear well. People infected with monkeypox are disfigured with extremely painful bumps. Some of the people who don't take precautions during COVID-19 outbreaks simply don't believe the disease exists. Therefore, even the most diehard conspiracy theorists will be unable to pretend that monkeypox is "another flu."
Even though there aren't any known cases of cognitive dysfunction resulting from monkeypox infection as occur from COVID-19, people may actually feel that being ugly is worse than being dumb, and therefore respond more proactively by wearing masks.
Vaccines
Another difference with COVID-19 is that smallpox vaccines have an 85% efficacy rate against monkeypox, and many of these vaccines have been stockpiled because monkeypox and smallpox have long been thought to be useful as a terrorist attack. Of course, there aren't enough vaccines across the world to vaccinate everyone on day one, because it was thought that ring vaccination would be effective against monkeypox. Because of the long incubation period, monkeypox can be prevented by vaccination 4 days after exposure.
Ring vaccination would have been effective if contact tracing were possible. With community transmission already occurring, it's not possible to vaccinate people within the 4-day window if they don't know they were exposed.
Potential market reactions
I played out three possible scenarios for the cryptocurrency markets in response to monkeypox.
The first outcome is that the epidemic is limited, or that this variant turns out to be less deadly than COVID-19 is. In that case, I imagine that people will just ignore it and most people will be infected before vaccines are even made available. Some will die, but as with COVID-19, HIPAA will prevent images of the dying from being shared by hospitals, and people won't grasp its seriousness. Since I think a pandemic is more likely than not, cases are growing exponentially, and people will still take horrific images of themselves, I don't place high odds on this outcome.
The second outcome is that a panic similar to that of March 2020 occurs, the current all-time high number of bitcoin longs are liquidated, driving bitcoin prices down to $10,000 for a few minutes or hours, and presenting another "generational buy" opportunity. I think this outcome is most likely.
The third outcome is that while a pandemic does occur, there has already been so much carnage in the markets that prices won't go much lower. This outcome is partially based on the assumption that the Fed would react like it did in March 2020 by immediately cutting interest rates to zero. Since much of the losses (at least in the stock market) so far have been caused by interest rates hikes, it would stand to reason that the elimination of that threat would create a trend reversal. However, because monkeypox lockdowns would likely be short because it would just be a matter of producing an already known vaccine, and because the Fed might simply see the pandemic as a way to generate the layoffs and reduced demand it needs to end inflation, the Fed might simply do nothing. The existence of such high inflation leads me to believe that this outcome is plausible but not as likely as the second.
Conclusion
Myself, I decided to liquidate 60 ETH on the grounds that the odds of the worst possible outcome are higher than the odds of the best possible outcome at this time.
Every person who has money invested in cryptocurrencies or stocks - which is the majority of people - needs to make a decision now as to how they view the endgame of the monkeypox outbreak. With the World Health Organization convening an emergency meeting about monkeypox soon, whatever direction the markets are going to take will be revealed before the conclusion of that meeting, so one cannot wait to decide on their position until more is known.
Comments (2)
Archived discussion. New comments and replies are closed.