The cryptocurrency sector rebounded on Monday, following a recovery in European and US stock markets after their worst slump in over a year.
Major cryptocurrencies slumped on Friday as a new coronavirus variant sparked concerns across the broader market.
The B.1.1529 strain, labelled Omicron, was reported to be a more transmissible variant of COVID-19, and was first identified in South Africa. It has since been detected in 14 countries, with various governments ramping up coronavirus precautions and travel restrictions.
The world’s largest cryptocurrency fell as much as 8% on the back of the news as investors turned to safer, less risky assets in the face of the uncertainty. The coin was down 20% from an all-time high of nearly $69,000, which it hit earlier this month.
It comes as the boss of global financial company deVere Group said Bitcoin’s current price drop will be seen as a major buying opportunity amongst investors with the value likely “to double over the next 12 months”.
“The crypto markets have mirrored the reaction of other financial markets. This underscores how mainstream digital assets have now become, as an increasing number of institutional investors have piled into Bitcoin this year,” Nigel Green, chief executive and founder of deVere Group said.
“But for this reason, when they temporarily reduce exposure to most risk-on assets, despite the longer-term outlook, they also do the same with Bitcoin. In turn, due to Bitcoin’s mammoth market share, it weighs down the entire crypto sector.”
He added: “However, I think this a knee-jerk reaction from the crypto market. It will move on from this relatively quickly as it did with the Delta variant in the summer.”
Cryptocurrencies have risen to all-time highs in recent weeks thanks to an increased institutional take-up of the coins. Last week, US banking giant JPMorgan Chase (JPM) said ethereum could be a better investment than bitcoin.
"With ethereum deriving its value from its applications, ranging from DeFi [decentralised finance] to gaming to NFTs [non-fungible tokens] and stablecoins, it appears less susceptible than bitcoin to higher real yields," JPMorgan said.
However, many still warn on the risks of investing in cryptos, with India announcing last week that it will introduce a new bill that would ban the majority of digital currencies.
“The coming weeks may be a little interesting as the same bill that unnerved crypto investors is set to be tabled in the Indian parliament,” said Kunal Sawhney, CEO at Kalkine Group.
“It is then that the real intent of this bill will become public. Either way, it may have an impact, resulting in similar price fluctuations when China banned cryptos.”