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…