Crypto Holds the Line as Markets Crash on News of a New COVID Strain
A new COVID-19 variant discovered in South Africa has triggered a bloodbath in both Wall Street and crypto. The World Health Organization announced the discovery of the B.1.1.529 variant on November 26, noting that the strain contains multiple mutations, some of which are concerning.
With the strain spreading rapidly and health officials worried it might resist vaccines, markets crashed over concerns that governments across the globe might introduce strict measures to curb widespread infection.
In the global stocks market, the Dow Jones Industrial Average plunged 905.04 points (2.53%) yesterday to close at $34,899.34. This plunge marked the worst day for the index this year. The S&P 500 lost 2.27% to close at $4,594.62, and the Nasdaq Composite fell 2.23% to finish at $15,491.66.
Like the traditional market, the crypto space is also bleeding, with BTC, the leading crypto by market capitalization, losing over 0.57% over the past 24 hours to change hands at $55,049.62. BTC’s current represents a 19.99% drop from its November 10 all-time high (ATH) of $68,789.63.
However, it is worth noting that BTC and the rest of the crypto space seem to have built some resilience against losses associated with crashes in the global stocks market. The market is known to bleed significantly whenever global stock markets experience sell-offs. For instance, BTC slid below $30,000 in July after a rout in the global stocks market.
Varying sentiments from experts
Apart from the news of the B.1.1.529 COVID variant, the crypto space is also battling selling pressure emanating from the $1 trillion US infrastructure bill, which President Biden signed into law earlier this month. However, experts believe that BTC’s current price is not concerning, seeing as 20% drops are not new in the market.
According to Vijay Ayyar, the Head of Asia-Pacific at Luno, BTC’s plunge is a market correction within an uptrend. He added that options expire on days like Friday, introducing more volatility to the market. However, Ayyar believes BTC is still within its bullish cycle. Nonetheless, he claims BTC sliding back to the $48,000 to $50,000 level would be concerning.
However, other experts believe the current market slump shows BTC has not yet secured its position as a store of value. An example is Ross Mayfield, an investment strategy analyst at Baird, who said BTC is still a risky asset by large. He pointed out that BTC investors would sell their positions when things get scary.
Mayfield added that,
I think the role that Bitcoin will eventually play is still uncertain. The role that something like gold and Treasuries play is pretty well known at this point. So, the conclusion is that when things really look ugly, the traditional safe havens will rise to the top.
However, gold was only up 0.07% as of November 26 to trade at $1788.10. These marginal gains show that investors have not turned to gold as an inflation hedge.