What happened
This morning, equity markets and crypto markets are currently under intense pressure. Risk assets as a whole are reacting negatively to concerns that a new coronavirus variant found in South Africa could be the worst one yet.
These concerns have bled into many of the best-performing cryptocurrencies of late. In the crypto world, metaverse-related cryptocurrencies Decentraland (MANA 5.32%), Enjin Coin (ENJ 6.45%), and The Sandbox (SAND 5.48%) have all outperformed their crypto peers by a wide margin in recent months. However, today the market has turned red even for these highfliers.
As of 10:30 a.m. ET, Decentraland, Enjin Coin, and The Sandbox were down 9.7%, 10.2%, and 5%, respectively.
These tokens each hit daily lows of more than 12% this morning, despite being in positive territory yesterday.
Image source: Getty Images.
So what
For cryptocurrency investors, one might think that the disruptive potential of these technologies may outweigh any risks to be broader economy. After all, one of the key reasons many investors hold some crypto is as a form of a market hedge.
However, it appears capital flows into crypto are being impacted by these concerns. Investors are seemingly discounting the growth prospects of many cryptocurrencies and blockchain projects today as a result of this news.
The fact that the correlation between the crypto sector and other innovative high-tech stocks appears to be increasing is a trend investors will want to keep an eye on.
Now what
The extent to which another potentially disastrous chapter in this ongoing pandemic will be a headwind or a tailwind for metaverse-related cryptos (and stocks for that matter) remains to be seen. Indeed, one of the key drivers of many metaverse-related projects over the course of the past two years has been the demand for virtual spaces for folks to interact.
However, in times of market panic, capital tends to move out of risk assets. The fact that capital outflows have seeped into the crypto space is another trend worth watching.
Each of these three metaverse-related cryptocurrencies certainly provide a compelling investment thesis to aggressive long-term growth investors. Accordingly, perhaps this is the Black Friday sale many really hoped for.
