Bitcoin slides to $55,000 as new COVID-19 variant rattles traditional markets

Friday’s financial markets are a sea of red, as fears about a new coronavirus strain appear to have snuffed out risk appetite.

While bitcoin is down 6.7% on the day to around $55,000, S&P 500 futures are down 2.3%. The MSCI Asia-Pacific index has shed 1.7%, while the commodities complex retreated more than 2% on both sides of the Atlantic.

Meanwhile, risk-averse assets such as the Japanese yen and US Treasuries continue to gain traction.

New COVID-19 variant scare

The usual risk-averse reaction follows reports of a new coronavirus variant being found in Botswana, South Africa, and Hong Kong that may be resistant to vaccines.

If these worries are realized, many countries may be forced to re-impose economically severe lockdown measures.

“There is a great deal about this variant that we do not understand,” Richard Lessells, an infectious disease physician at the University of KwaZulu-Natal in Durban, South Africa, told the science publication Nature.

While the virus’ mutation profile is concerning, “we now need to conduct additional research to determine the relevance of this variant and its implications for pandemic response,” Lessells added.

Bitcoin’s safe haven status

Bitcoin’s drop in traditional markets in the face of risk aversion indicates that the cryptocurrency has yet to gain acceptability as a safe haven asset.

If any lockdowns occur, they may exacerbate supply chain disruptions, hence increasing inflation — a plus for bitcoin, given its widespread perception as a store of value asset.

According to JPMorgan, bitcoin’s October rise was mostly fueled by rising inflation predictions and the cryptocurrency’s appeal as an inflation hedge.

Bitcoin, which remains susceptible to Fed tightening, plummeted dramatically on Nov. 10 as a larger-than-expected consumer price index in the United States fueled fears of an early Fed rate hike.


Image courtesy of Cointelegraph News/YouTube

Micky is a news site and does not provide trading, investing, or other financial advice. By using this website, you affirm that you have read and agree to abide by our Terms and Conditions.
Micky readers - you can get a 10% discount on trading fees on FTX and Binance when you sign up using the links above.