Bitcoin was no refuge on a day when investors needed a place to hide while the mutant virus battered global financial markets.
The new strain of the virus was first reported in South Africa is being investigated in countries throughout Europe and the Middle East.
Over 60 new COVID19 infections are being investigated in the Netherlands, and three cases of Omicron have been reported in Israel from people who haven’t traveled abroad.
Across the world, governments are tightening travel restrictions to southern Africa.
US travel advisories are being upgraded to warnings, and the U.K. is adding four more nations to its “red list.” South Africa is expected to announce stricter lockdown measures in response.
During the rout in world stock markets caused by a potentially dangerous COVID19 variant, the world’s biggest crypto dropped almost 10% to $54.3K on Friday afternoon.
Despite its own history of big swings and speculative frenzy, Bitcoin proponents are unable to claim that the token can be used as a hedge against volatility in more traditional risk markets.
The correlation between the flagship crypto and risky assets like stocks has been on the rise since the beginning of the year.
In other words, when stocks fall, Bitcoin is likely to fall as well, decreasing its usefulness when hedged against volatility.
Bitcoin enthusiasts have suggested that, because of its limited supply of 21 million tokens, it can act as a hedge against inflation.
The world’s most popular crypto would make sense if that is the narrative, as COVID19-related news might have fueled concern about the stability of the global economy.
Bitcoin’s recent gains can be explained by roughly half inflation fears and half by exuberance and momentum trading, according to market pundits.
However, there is no way to tell just yet how Bitcoin and other crypto assets will fit into a portfolio if the recent trading action is any indication.
Regulatory concerns and waning interests in U.S. exchange-traded funds tied to Bitcoin futures have also put a damper on bitcoin, which hit an all-time high of $69K earlier this month.