Bitcoin slips to 55 thousand dollars as renewed fears of Covid to shake traditional markets
Financial markets are in a sea of red on Friday as concerns about a new variant of the coronavirus appear to have dampened risk appetite.
While bitcoin is trading down 6.7% on the day near $55,000, S&P 500 futures are losing 2.3%. The MSCI Asia Pacific Index is down 1.8%, and the commodities complex is bleeding, with oil down more than 2% on both sides of the Atlantic. Meanwhile, anti-risk assets such as the Japanese yen and US Treasuries are gaining traction.
The classic risk aversion action comes on the heels of reports of a new variant of the coronavirus discovered in Botswana, South Africa and Hong Kong, which may be resistant to vaccines. If these fears materialize, many countries may have to reimpose economically painful lockdown restrictions.
“There is a lot we don’t understand about this variable,” said Richard Lisels, an infectious disease physician at the University of KwaZulu-Natal in Durban, South Africa. Tell The interdisciplinary science journal Nature. “The mutation profile gives us concern, but now we need to do the work to understand the importance of this variable and what it means for the pandemic response.”
Bitcoin’s decline amid risk aversion in traditional markets indicates that the cryptocurrency has not yet found acceptance as a safe haven.
Shutdowns, if any, could exacerbate supply chain disruptions, driving up inflation – which is positive for bitcoin, given that it is widely seen as a storehouse of valuable assets. According to JP MorganBitcoin’s rally in October was primarily caused by a sudden rise in inflation expectations and the allure of the cryptocurrency’s inflation hedge.
However, the US Consumer Price Index (CPI) has already reached a level Three decades high. Another rise in CPI could cause the US Federal Reserve (Fed) to prioritize controlling inflation over growth by undoing stimulus faster. This can lead to deflation in asset prices.
Bitcoin, still subject to tightening by the Federal Reserve, fell sharply on November 10 after a hotter-than-expected US consumer price index bolstered fears of an early Fed rate hike.
The minutes of the Federal Reserve’s November meeting released on Wednesday show that officials will be ready to raise interest rates sooner than expected.
The cryptocurrency performance was better on Thursday and it looked like it will break the resistance at $60,070. That would have confirmed a double bottom breakout on the 4 hour chart. However, renewed coronavirus fears have played a spoiler sport.
Update (November 26, 09:16 UTC): Updates bitcoin price, market moves in headline and story.