Cryptocurrencies dropped across the market early Friday morning as the world grapples with news of another COVID-19 variant. Stock markets fell in premarket trading, but cryptocurrencies, which trade 24 hours per day, started dropping shortly after midnight ET.
Bitcoin (BTC -3.22%) has been sliding for nearly a month, but that trend accelerated early Friday. The value of the largest cryptocurrency is down 7% in the past 24 hours as of 9 a.m. ET and has fallen about 21% since reaching nearly $69,000 early in November.
Smaller cryptocurrencies fell even harder in the past 24 hours, with Ethereum (ETH -6.04%) down 9%, Dogecoin (DOGE -13.13%) dropping 8%, and Solana (SOL -22.34%) falling 8.3%.
The World Health Organization has scheduled a special meeting today on a new variant of COVID-19 that is spreading in South Africa and potentially more countries. Data is very early, but this variant has reportedly been associated with greater transmissibility and more immune evasion than previous strains.
Cryptocurrencies weren't the only assets to drop today. Oil is down 6.5%, and premarket stock markets are down between 1% and 2% as well. This is a broad sell-off, and cryptocurrencies just happen to be one thing investors are selling.
Today's move looks to be what's known as a risk-off trade. Investors sell risky assets in favor of cash or safer assets like Treasuries. It should be no surprise then that U.S. 10-year Treasury yields have fallen 10 basis points to 1.53% as investors bid up government debt.
It's worth noting that Friday is a short trading day during the holiday week, and this generally brings volatility as Wall Street traders take time off. This can lead to some bigger than usual moves, which could be magnifying the trading today.
Given the fact that cryptocurrencies are more volatile than the market overall, it's no surprise that they're magnifying the market's moves. What's clear across the board is that this is also a speculative move by the market. It's not clear how this strain of COVID-19 will spread or where and what the economic impact will be. For now, traders are speculating that it will hurt markets and force central banks to keep interest rates low for longer. In time, we will see if that happens.
What I think is clear today is that cryptocurrencies are in a tailspin for the moment. Values are down 20% or more in many cases, and if investors are no longer buying risk assets on fear of an economic slowdown from COVID-19, that may not be followed by trillions of dollars in stimulus, as it was over the past 18 months. So far, crypto has not been a hedge against the markets falling and has in fact magnified the market's reactions, which is happening again today.