Bitcoin price plunges as Covid Delta variant spreads

Bitcoin has crashed below $US30,000 ($A40,900), while around $US40 billion ($A54.5 billion) was wiped off the whole cryptocurrency market, because investors are spooked about the impact of the Delta variant on the global economy.

The most popular cryptocurrency, bitcoin fell by around 6 per cent to a price of $US29,700 ($A40,400) on Tuesday, while ethereum and dogecoin experienced drops of 7 per cent each.

On the US market, shares in airlines, cruise companies and energy stocks also took a hit amid fears of an economic slowdown, due to Delta outbreaks.

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Tai Hui, chief Asia market strategist from JP Morgan Asset Management, said the global market sell-off overnight reflected growing concerns about the Delta variant spreading across the globe.

“Investors are worried that a fresh outbreak could potentially hinder the pace of economic reopening. The next one to two months will be an important litmus test on governments’ strategy in normalising lives and economic activities amid the threat of the pandemic,” he said.

“Instead of relying on hard lockdowns and shuttering businesses to control outbreaks and manage the stress on medical services, governments will need to apply a combination of vaccination, tracking and testing in order to effectively ‘live with Covid’ while limiting the economic damage.”

For the US and large parts of Europe, vaccination progress is good although not quite at herd immunity level, he said.

“Nonetheless, those who have been inoculated should still have good protection against the Delta variant, according to the latest hospitalisation and mortality statistics,” he said. “Hence, the potential risk to economic reopening is manageable, especially in regions or states where vaccination rates are high.”

The Aussie situation

Australian analyst Tony Sycamore from City Index agreed that the spread of the Delta variant had rattled global stock markets in the early part of this week as investors fear that it might lead to widespread lockdowns and impact the economic recovery.

While vaccine rollouts would stabilise the situation elsewhere, it was a concern in Australia.

“The slow vaccine rollout in Australia has played its part in the current lockdown, impacting almost half the Australian population. Until the vaccine rate is considerably higher, the Australian economy and business will remain vulnerable to Delta and other variants,” he said.

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But the malaise in cryptocurrencies this week is only partly a result of the spread of the Delta variant, as cryptocurrencies are considered a “risky asset” along with equities, he said.

“However, unlike equities, bitcoin has been unable to recover from its losses as increased regulatory scrutiny continues to weigh on prices and sentiment,” he said.

Regulators around the world are increasingly scrutinising cryptocurrency, with China recently banning bitcoin mining and Beijing financial companies being restructured to eliminate crypto trading services.

A further blow to bitcoin and other coins happened last month when China arrested more than 1100 crypto users on money laundering charges.

In the UK, regulators banned trading exchange Binance from carrying out any regulated activities in the country, while Japan, Canada and Thailand have also issued warnings about the platform.

The big bitcoin drop

Bitcoin fell below the $US30,000 ($A40,900) mark for the first time since June 22, with the price plunging more than 50 per cent since its all-time high of nearly $US65,000 ($A88,500) in mid-April.

“Bitcoin is the ultimate risky asset right now and it could see intense selling pressure if Wall Street enters into panic-selling mode,” said Edward Moya, US senior market analyst for the online trader Oanda.

But Adrian Przelozny, CEO of Australian cryptocurrency exchange Independent Reserve, said while bitcoin is down 4 per cent today, it has grown 225 per cent in the past year.

“If the large volume going through our … desk right now is anything to go by, sophisticated investors see this as a great opportunity to buy more bitcoin and other major cryptocurrencies,” he said.

“For those of us who have been in this space for some years, we already know that bitcoin has its ups and downs. I take a long-term view, focusing on advancements in technology and innovation in order to get a gauge on the healthiness of the broader ecosystem. With the amount of global venture capital funding getting behind projects right now, short-term price dips do not change my long-term bullishness.”

Some analysts predict bitcoin will trade between $US20,000 ($A27,000) and $US40,000 ($A54,000) for the rest of the year, with the pandemic not the only thing impacting on it.

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Author: Shirley