discussion The Omicron variant and its effect on the cryptocurrency market

[kyoukage01 3181]

With the detection of yet another COVID-19 variant (designated as "Omicron") of particular concern, global markets have sank down once again, as Alpha and Delta did before it. The internet has been chock full of news concerning its effects, and here I'll provide a couple of links to the latest of them.

 

Spoiler

OECD warns Omicron variant could derail world economy

Richard Partington

 

 

Western governments could be forced to bring in fresh emergency financial support for businesses and households if the Omicron coronavirus variant causes a severe global slowdown, a leading economic thinktank has warned.

 

Sounding the alarm as more cases are identified, the Organisation for Economic Co-operation and Development (OECD) said a renewed wave in the pandemic threatened to add to the existing strain on the world economy from persistently high levels of inflation.

 

Should Omicron prove more transmissible than other variants or more resistant to existing vaccines, it could exacerbate disruption to already battered supply chains and risk driving up inflation for a prolonged period, the Paris-based organisation said.

 

If it takes a more severe turn, it could also force governments to impose tighter mobility restrictions, hurting demand for goods and services, and leading to a sharp fall in economic activity and lower inflation, similar to the earliest phase of the pandemic.

 

Laurence Boone, the chief economist of the OECD, said there were two scenarios facing the international economy as Omicron adds to the uncertainties in the recovery from the Covid-19 crisis.

 

“One is where it creates more supply disruptions and prolongs higher inflation for longer. And one where it is more severe and we have to use more mobility restrictions, in which case demand could decline and inflation could actually recede much faster than what we have here,” she said.

 

If the Omicron turned out to be “more evil” than other variants, Boone said, governments could be called upon to step in to cushion the blow for businesses and households. “That could be a scenario where we need more fiscal support at this stage,” she added.

 

Already in the UK, bosses of pubs, bars and restaurants are reporting a wave of cancellations for Christmas party bookings amid fears over the new variant, in an early sign of its harmful economic impact.

 

Publishing its latest economic outlook report, the OECD said the world’s recovery from previous lockdowns was continuing but that momentum had eased and was becoming increasingly imbalanced.

 

It added that the failure to ensure rapid and effective vaccination around the world was proving costly, with uncertainty remaining high and as new Covid variants are identified.

 

The outlook projects global GDP growth at 5.6% this year and 4.5% in 2022, before settling back to 3.2% in 2023, close to rates before the pandemic.

Boone said the G20 group of wealthy nations had spent about $10tn (£7.5tn) in emergency support since the start of the pandemic, but that it would take just $50bn to ensure vaccination worldwide.

 

“The news about the Omicron variant may actually be a reminder of how shortsighted that failure has been. We’re spending to support our economies, while we’re failing to vaccinate the whole world,” she said. “As a result the world really is not looking better.”

 

The intervention by the OECD comes as concern grows over persistently high levels of inflation across the world economy. While demand for goods and services has soared after the easing of lockdown measures earlier this year, supply constraints and freight bottlenecks caused by continuing pandemic disruption have led to shortages of materials, pushing up prices.

 

Central banks around the world are grappling with rising inflationary pressures. The chair of the US Federal Reserve, Jerome Powell, signalled on Tuesday he would support a quicker withdrawal of emergency pandemic stimulus measures in response, while the Bank of England has been tipped to raise interest rates within weeks.

The OECD increased its inflation forecast for next year to 4.4%, up from the 3.9% estimated in September. It predicts largest increases in the US and the UK, with rates of 3.1% and 4.4% next year respectively.

 

Although warning that the new variant could lead to higher and more persistent inflation, Boone said most central banks had been waiting to see whether supply tensions would diminish, “and rightly so”.

 

“Faced with supply bottlenecks and where overall demand is not excessive, the best central banks can do is actually to signal that they will act if the pressure continues to increase. But it is for companies and governments to address the bottlenecks,” she added.

source: https://www.theguardian.com/business/2021/dec/01/oecd-warns-new-covid-variant-could-cause-severe-global-slowdown-omicron

 

Spoiler

Economists Game Out How Omicron Will Hurt the Global Recovery

Enda Curran, Simon Kennedy

 

 

The omicron variant is dealing a blow to optimistic hopes that the world economy would enter 2022 on a firmer footing, potentially undermining plans by policy makers to focus on inflation rather than weak demand.

 

The imposition of travel restrictions will shake consumer and corporate confidence, likely limiting activity in some places just as the holiday season gets underway in many economies. Japan will effectively ban the entry of all foreign visitors as part of its plan to curb the virus spread, broadcaster NTV reported.

 

Markets moved swiftly to price in an economic blow. Expectations for interest-rate increases over the coming year dropped by at least 10 basis points on Friday for the central banks of the U.S., U.K. and Australia.

 

What comes next will be dictated by what scientists discover about the new covid-19 variant, including how resistant it is to vaccines and how more transmissible it is than the delta variant which raged in recent months without sending economies back toward recessions.

 

The worst case scenario would be if the mutation necessitates a return to growth-crippling lockdowns, which would threaten already strained supply chains and damage recovering demand. That would reignite fears of a stagflationary mix of faster inflation and slower growth.

 

Goldman Sachs Group Inc. economists spelled out four possibilities, one of which includes a downside scenario where a large infection wave in the first quarter of next year sees global growth slow to a 2% quarter-on-quarter annual rate -- 2.5 percentage points below their current forecast. Growth in 2022 as a whole would be 4.2%, or 0.4 percentage point below forecast.

 

A benign outcome is that the mutation doesn’t prove as threatening as initially feared. But its emergence serves as a reminder that the pandemic will remain a threat for the global economy, potentially for years to come.

 

“We are not yet in stagflation,” said Alicia Garcia Herrero, chief Asia Pacific economist with Natixis SA. “But one more year without cross-border mobility and related supply chain disruptions might push us there.”

Smaller Impact

Even still, some economists say the fallout may be less than seen during the 2020 recession. 

 

Governments, albeit not China’s, have shown a reluctance to rush back into lockdowns. And the supply of vaccines partly explains why high frequency data suggest curbs that have been imposed in Europe have proved more flexible and less damaging to growth.

 

“Businesses and households have adapted to restrictions and lockdowns and so the blows may not be as severe this time around,” said Rob Subbaraman, head of global markets research at Nomura Holdings Inc. 

 

“That would mean localised lockdowns as outbreaks emerge, tighter restrictions on regional travel and a greater likelihood of port shutdowns,” he said. “China has proved adept at managing outbreaks, but the long-run economic costs will mount if highly-transmissible strains are endemic globally.”

 

If the variant spreads “it could slow the healthy momentum in the economy” of the U.S., according to Mickey Levy, chief economist for the U.S. and Asia at Berenberg Capital Markets. 

 

Markets calmed in early Asia trade Monday after a sharp sell-off Friday as news of the variant arose. S&P 500, Nasdaq 100 and European contracts jumped and oil rallied back above $70 a barrel.

 

Before omicron emerged, some economists had tipped a transition in demand away from durable goods and toward services such as leisure, travel and tourism. But that switch may now be delayed -- denting prospects for a global recovery that is already uneven.

 

The International Monetary Fund in October warned that the recovery has lost momentum and become increasingly divided. The fund calculated gross domestic product for advanced economies will regain its pre-pandemic level in 2022 and even exceed it by 0.9% in 2024; it reckoned emerging and developing markets would still undershoot their pre-pandemic forecast by 5.5% in 2024.

Policy Options

One challenge for policy makers battling the economic aftershocks of a sustained outbreak will be the fact that they have fewer options after last year’s stimulus effort. 

 

Only a handful of central banks have tightened monetary policy since the end of last year’s recession and the developed world’s key benchmarks remain around zero, meaning they lack room to come to the rescue again. Governments are already shouldering soaring debt burdens.

 

“In the absence of concerns about any negative impact of the variant, the Fed would in all probability speed up its tapering of asset purchases, but the uncertain downside effects of the variant likely leads the Fed to postpone any such decision,” said Levy.

 

Traders have rushed to wager that the Federal Reserve and its peers will be slower to raise rates. Futures signal the first Fed hike may not come until July 2022, a month later than was seen last Wednesday when June was the first month with an increase fully priced in. 

 

Even so, Federal Reserve Bank of Atlanta President Raphael Bostic on Friday played down the risk of the new variant and remained “very open” to accelerating the withdrawal of the Fed’s asset purchase program. 

 

European Central Bank Governor Luis de Guindos said he too thought “the effects over the economy will be more limited than last year.”

 

Policy makers have proved adept at changing tack if required. If nothing else, the existence of omicron shows the perils of making predictions in the pandemic age.

“One thing is for sure, the economic uncertainty has risen even higher: economists need a big dose of humility in forecasting the 2022 outlooks,” said Subbaraman. “That dose has now got even bigger.”

 

— With assistance by Garfield Clinton Reynolds

source: https://www.bloomberg.com/news/articles/2021-11-29/economists-wargame-how-omicron-will-impact-the-global-recovery

 

Meanwhile, the cryptocurrency market has already dipped in a state of 'fear' since November 19. The announcement of the new variant on the 26th, where the WHO designated it as "a variant of concern" apparently made the situation worse, as the news of the virus variant may have influenced Bitcoin's tumbling down from its previous ~$60,000 a few weeks ago. If there is any winner of sorts here, its a coin of the variant's namesake: the Omicron token, an otherwise obscure crypto coin.

 

Spoiler

'Omicron' the cryptocurrency rides new variant rollercoaster

By Tom Wilson

 

LONDON, Nov 29 (Reuters) - As global markets fell last week on news of the new Omicron coronavirus variant, one cryptocurrency with the same name soared after the Greek letter entered the investor lexicon.

 

The price of the hitherto-obscure digital token, whose Twitter feed has little more than 1,000 followers, rose almost ten-fold from Friday to Monday morning when it hit $688, before tumbling as much as 75%, crypto tracker CoinGecko said.

 

Omicron the token, which its website describes as "a decentralized treasury-backed currency protocol," was trading at about $371 at 1435 GMT. On Thursday it was worth about $65.

 

The World Health Organization, which on Friday named the new COVID-19 variant Omicron, said as more countries reported cases it carries a "very high" global risk of surges, although scientists have said it could take weeks to understand its severity.

 

Bitcoin suffered its worst day in two months on Friday, dropping by more than 8% as investors dumped stocks and other riskier assets in favour of perceived safe havens like the dollar. It has since recovered nearly all of its losses, with global markets gaining a semblance of calm on Monday.

 

From "squid game" to dogecoin, minor cryptocurrencies have this year benefitted from links to memes or web culture, recording rapid booms and busts while more mainstream names such as bitcoin soar in popularity.

 

It was not clear when the Omicron token was launched. Data on its price at CoinGecko was only available from Nov. 8, while a Telegram channel under the name OmicDAO was launched a day earlier.

 

Reuters was not able to reach anyone representing Omicron for comment.

source: https://www.reuters.com/markets/europe/omicron-cryptocurrency-rides-new-variant-rollercoaster-2021-11-29/

 

Questions of concern for this topic (at the moment) are the following:

• How severe will be the impact of the Omicron variant for the weeks and months to come, particularly for cryptocurrencies?
• What would be the next best move for crypto traders and investors to cope with the current market situation?

You may post your comments below. Thank you.

 

Edited December 2, 2021 by kyoukage01

[Whited35 15285]

13 hours ago, kyoukage01 said:

How severe will be the impact of the Omicron variant for the weeks and months to come, particularly for cryptocurrencies?

Another good topic after a long silence 😁 ! Well, the impact of this variant is still under investigation. The major concern is how effective will be the available vaccines against the virus. If antibodies developed by the COVID vaccine are not enough to fight against this variant than surely it will affect global economy as well as the cryptocurrency markets. 

As you have been noticing, a huge sell off orders are being noticed on different high traffic CEXes including Binance. Hope, everything will go in the plus field. 

[kyoukage01 3181]

On 12/3/2021 at 12:09 AM, Whited35 said:

Hope, everything will go in the plus field.

Well, that will ultimately depend on whether the new variant will go rampant like Delta did. Like OMG, the seemingly lenient health protocol moves the Indian government did back then only made a superspreader event galore... anyway, at least efforts are made early enough to contain the spread of the Omicron variant.

 

As long as there's no news of Omicron spreading (even better, its early eradication by isolation or whatever), I think the global market will hold sturdy. Omicron has been studied and determined to be even nastier than the previous variants so far after all, and the mere prospect of another lockdown might make crypto holders sell off even more of their assets in preparation.

 

[Ridam 7455]

Things are dubious to say right now. There are so many things that are on the edge of falling down and if one of them fall down, we may see a domino effect being played out. Right now Bitcoin correlation with the traditional market has increased significantly and I see Bitcoin is also bot a safe bet against it. We may take the recovery time period as an excuse but it will also Face like it did during the first phase of Covid.

There is chance of impact on economy because of the new variant but I don't see any big impact until we see lockdown again otherwise it won't be a big issue in my opinion.

[kyoukage01 3181]

On 12/7/2021 at 2:37 PM, Ridam said:

There is chance of impact on economy because of the new variant but I don't see any big impact until we see lockdown again otherwise it won't be a big issue in my opinion.

At least the current spread of the virus isn't as bad as Delta was, assuming we can take this data below at face value. It's been almost a month and the global number of confirmed cases so far haven't even reached 10,000.

Spoiler

 

source: https://en.wikipedia.org/wiki/Template:SARS-CoV-2_Omicron_variant_cases

 

By the way things are going, there won't be any drastic lockdowns for the forseeable future IMO.

 

On 12/7/2021 at 2:37 PM, Ridam said:

Right now Bitcoin correlation with the traditional market has increased significantly and I see Bitcoin is also bot a safe bet against it.

Bitcoin's bullish trend has already been cooling down when its price dipped below $60k somewhere during November 18, well before the Omicron variant was announced. Probably has something to do with the upcoming holiday season, but yeah, Omicron made it worse, as I've said before. As to how BTC correlates with traditional markets at the present time, I think this link can give a better picture.

Spoiler

Chinese stocks decline as investors reassess omicron risk; Weibo shares drop

Weizhen Tan

 

SINGAPORE — Chinese stocks declined on Tuesday, tracking other losses in Asia-Pacific markets, as the omicron variant returned to focus. Meanwhile, bitcoin prices continued to tumble after some losses overnight.

Hong Kong’s Hang Seng index led losses, tumbling 1.33% to close at 23,635.95. Tech stocks dipped, with Alibaba down almost 2%, Tencent losing 1.46%. JD tumbled 2.45%. The Hang Seng tech index was down 2.28%.

 

Shares of Chinese social media giant Weibo dropped more than 9%, as China’s cyberspace regulator says it has fined the firm’s operator three million yuan ($471,151). Since its trading debut in Hong Kong last week, the stock has lost over 10%.

 

Meanwhile, Chinese telecommunications operator China Mobile announced in a filing that it has received approval from regulators for a secondary listing in Shanghai, for an offering of up to 845.87 million shares.

Mainland Chinese shares were also in negative territory. The Shanghai composite fell 0.53% to close at 3,661.53, while the Shenzhen component dipped 0.5% to 15,136.78.

 

Japan’s Nikkei 225 lost 0.73% to close at 28,432.64, while the Topix was down 0.22% to 1,973.81. Taiwan’s Taiex fell nearly 1% to 17,599.37.

 

South Korea’s Kospi fell 0.46% to 2,987.95, with tech names in the red. LG Electronics was down 4.1%.

 

Australia’s S&P/ASX 200 traded near flat to close at 7,378.40.

 

Bitcoin prices continued to decline in the morning during Asia trade, after tumbling overnight to a low of over $45,800. It last pared losses to trade almost flat to $46,617, according to Coin Metrics.

Renewed caution on omicron variant

Caution on the new omicron variant prevailed again as the U.K. confirmed Monday that at least one patient infected with the new omicron variant of Covid-19 has died in the country. China also reported its first omicron case.

 

The University of Oxford published results on Monday showing two doses of the Oxford-AstraZeneca or Pfizer-BioNTech Covid-19 vaccines are substantially less effective at warding off omicron compared to previous variants of the coronavirus. The study has yet to be peer-reviewed.

 

The research paper noted that some vaccine recipients “failed to neutralize” the virus at all.

 

U.S. stocks pulled back overnight, with the S&P falling from a record start earlier in the week. It fell 0.9% to 4,668.97 and sits about 1.6% from its intraday record. The Dow Jones Industrial Average traded 320 points lower to 35,650.95. The technology-focused Nasdaq Composite fell nearly 1.4% to 15,413.28.The technology-focused Nasdaq Composite fell nearly 1.4% to 15,413.28.

 

“An increasing number of companies in Europe are telling staff to work from home amid rising cases numbers. Further research shows the lower protection from two doses of mRNA vaccines. China also reported its first case of Omicron. This offset a more bullish view of the oil market from OPEC,” ANZ Research analysts Brian Martin and Daniel Hynes wrote in a Tuesday note.

 

Oil prices fell Monday on renewed doubts about the variant. They recovered slightly during Asia hours. U.S. crude was up 0.27% to $71.49 per barrel, while Brent futures rose 0.38% to $74.69.

 

Investor focus will also likely be on the Fed’s latest two-day policy meeting, which kicks off on Tuesday. After the meeting wraps up on Wednesday, the Fed is expected to announce that it will speed up the pace of tapering its asset purchasing program.

source: https://www.cnbc.com/2021/12/14/asia-pacific-markets-investors-monitor-omicron-variant.html

 

With how BTC prices has gone down, this can be another opportune time for investors to 'buy the dip'. I dunno if whether BTC can go down further below $45,000 or not though.