Cryptos Fret As Omicron Spreads

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Crypto markets are subdued early on Monday as Omicron continues to rattle sentiment across world markets. Oil and Gold have tumbled and so have major equity markets.

Despite the progress made so far in vaccination, markets appear to be very fragile as the spread of the Omicron variant, deemed more virulent, transmissible and vaccine resistant than the earlier variants is feared to exacerbate the pandemic-induced economic stress. The proposed halt to the Fed's money-printing Quantitative Easing program has also unnerved investors about frothiness and bubbles in the prices of digital assets.

Cryptocurrency market cap has fallen to $2.13 trillion versus $2.18 trillion at the time of our Friday's review. Bitcoin's dominance decreased to 40.6 percent from 41 percent, Ethereum's dominance increased to 21.10 percent from 20.9 percent, and the remaining altcoins surged to 38.3 percent of the market capitalization from 38.1 percent on Friday.

Market capitalization of stablecoins is almost stable at $158.7 billion. Stablecoin dominance increased further to 7.45 percent, versus 7.26 percent on Friday reflective of the widening risk-off behavior within the cryptospace. Stablecoins do not carry the volatility associated with cryptocurrencies like Bitcoin as the value of these are pegged to the US Dollar or some other fiat currency.

Overnight percent decline in categories like Gaming (7.6%), Metaverse (7.3%), NFTs & Collectible (7.1%), Web 3 (6.1%), Memes (6.1%), Research (5.9%), Decentralized Exchanges (4.7%), DeFi (4.5%), Centralized Exchanges (4.2%), Smart Contracts (4.1%) etc. are more than the decline of 3.46 percent noted in the aggregate crypto market capitalization.

Bitcoin is trading at $45,662.89 after touching a 24-hour low of $45,608.11. Only 57 percent of the BTC holders are making profits at current prices.

Ethereum too is down 3.9 percent on an overnight basis to trade at $3,781.47. At current prices, 78 percent holders are in profit.

Third-ranked Binance Coin (BNB) coin is trading at $510.35, after shedding 5 percent on a daily basis and 6 percent on a weekly basis. The top-ranked coin among centralized exchanges commands a market capitalization of $85 billion. It is currently trading 26 percent below its all-time-high of $690.93 touched in May 2021. Market capitalization of crypto assets issued by centralized exchanges is down 4.2 percent at $115 billion.

Fourth-ranked Tether's market capitalization has increased to $76.3 billion from $76.4 billion on 17th December.

Solana (SOL), the top-ranked Proof of stake crypto has shed 8 percent on an overnight basis but is still 3 percent higher on a weekly basis.

USDC, the stablecoin issued by Circle, which was recently added to the Avalanche blockchain has surged to market capitalization of $42.1 billion, from $41.9 million on Friday. Avalanche is the seventh blockchain to support USDC.

Cardano (ADA) has slipped to 7th position as the USDC stablecoin has jumped up by a notch. ADA, the smart contracts platform and Ethereum competitor slipped 6 percent both overnight and in the past week. ADA's market cap is at $41.3 billion.

The decline in the prices of cryptocurrencies in sync with the global sell off in other markets proves that cryptocurrencies are not yet inversely correlated to the traditional asset classes. Digital assets are not decoupled or insulated from the ripple effects impacting most other asset classes.

The increasing stablecoin dominance within the crypto sphere demonstrates the increasing risk aversion and the preference to stay away from volatility. At a time when policy makers across the globe started to tackle the specter of runaway inflation, even if it meant compromising on growth, Omicron and its panic emerged on the world scene and threatened to derail economic recovery further.

Markets may have to live with intermittent phases of hope and despair till more clarity emerges on potential danger in the newly discovered variant.

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