Bitcoin Officially Enters Bear Market Territory Due To Concerns Over New Variant

Bitcoin, along with other cryptocurrnecies dropped in value sharply as the largest digital currency of the world in terms of market capitalization touched a seven-week low and officially entered the bear market territory.

According to Coin Metrics data, there was an almost 8 per cent drop in the value of the world’s biggest cryptocurrency within just 24 hours to $54,321.

That fall in its price was the lowest for the crypto asset since early October this year. 

Compared to its all-time high of $69,000 for a bitcoin which it had attained earlier this month, the value of the crypto currency was lower by more than 20 per cent on Friday.

Typically, tradable assets are said to have entered a bear market when their value fall by 20 per cent or more compared to their recent highs.

Along with the fall of bitcoin, there was also a slide in the values of other cryptocurrencies. The second biggest cryptocurrency ether dropped by more than 10 per cent to $4,059, while there was a 9.9 per cent slump in the value of XRP at just under 95 cents.

Investor panic over the new, heavily-mutated variant of the coronavirus that was first detected in South Africa recently was one of the primary triggers for the drop in the value of digital currencies along with other risk assets.

The World Health Organization held a press conference on Thursday to discuss the new variant of the coronavirus, known as B.1.1.529, which is likely to include more than 30 mutations. In reaction, the United Kingdom and other countries have temporarily halted flights from six African countries.

Global stock markets were in free fall on Friday, with European equities likely to have their worst day in almost a year and U.S. stock futures falling sharply.

The concerns about the new virus is pushing investors to relative safety of bonds, with the US Treasury yields moving sharply lower, and moving away from the riskier assets. Bond yields move inversely to prices.

Proponents of Bitcoin have referred to it as “digital gold,” a reference to the yellow metal’s position as a “safe haven” asset.

Cryptocurrency investors argue that the virtual currency serves as both a store of value and a hedge against inflation.

It’s worth mentioning that bitcoin is a very volatile asset, with price movements of more than 10% occurring on a single day.

(Adapted from CNBC.com)



Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability

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