Even bitcoin can’t escape Omicron. The digital currency plunged over the weekend, tumbling by more than a fifth to hit $41,967. Bitcoin reached an all-time high of $68,521 last month but has since lost momentum. Despite the latest pullback the digital currency is still up 75% since the start of the year.
The “gut-wrenching fall” will have left “even some veteran crypto bulls feeling a touch queasy”, says Mark DeCambre on MarketWatch. Crypto’s fans argue that digital assets aren’t correlated with the prices of other assets such as stocks and bonds, providing invaluable portfolio diversification. The trouble is that “crypto has been trading more in step” with equity and bond markets recently, with the weekend plunge following a sell-off on the S&P 500.
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Bitcoin’s growing popularity with Wall Street is part of the problem: the stockmarket’s recent falls may have forced hedge funds to sell their bitcoin holdings to raise cash. As a “growing army of institutional investors” move into crypto, bitcoin’s correlation with stocks will only increase.
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