Omicron Batters Crypto Market, Bitcoin Loses Grip
Nov 29, 2021
Bitcoin was no haven for investors on a day when a new variant of coronavirus wreaked havoc on the world's financial markets.
The new strain, which was initially discovered in South Africa, is now identified in nations throughout Europe and the Middle East.
In the Netherlands, around 60 new COVID-19 infections are being studied, and three cases of Omicron have been reported in Israel from persons who have not visited overseas.
Governments throughout the world are imposing travel restrictions to South Africa.
Travel advisories in the United States have been raised to warnings, while the United Kingdom has added four more countries to its "red list." In response, South Africa is set to impose tougher lockdown measures.
During the global stock market meltdown sparked by a possibly deadly COVID19 version, the world's largest cryptocurrency fell nearly 10% to $54.3K on Friday afternoon.
The collapse undercuts the case of Bitcoin supporters, who view the token as a possible hedge against volatility in more traditional risk markets, despite its own history of wild swings and speculative frenzy.
Since the beginning of the year, the association between the flagship cryptocurrency and risky investments such as equities has been growing. In other words, when markets fall, Bitcoin is likely to drop too, reducing its value as a volatility buffer.
Bitcoin supporters argue that the cryptocurrency may be used as a hedge against inflation, citing the cryptocurrency's restricted quantity of 21 million tokens.
The world's most popular cryptocurrency would make sense if that were the case, as news related to COVID19 could fuel concerns about the stability of the global economy.
According to market experts, the recent rise in bitcoin can be explained by about half by inflation fears and half by excitement and momentum trading.
However, it is impossible to predict how Bitcoin and other crypto assets will fit into a portfolio, judging by recent trading events.
Regulatory worries and declining interest in U.S. exchange-traded funds linked to Bitcoin futures have also dampened the price of bitcoin, which reached an all-time high of $69,000 this month.