Investors blame rising Omicron cases as the cause for Falling Crypto prices

Omicron cases in the US have been a major catalyst in the falling crypto prices this December, according to investors and analysts.

While Ethereum remains positive for 2021, +400%, this month may be the coins’ worst since March 2020. Similarly, Bitcoin and Ripple have also seen serious growth this year, but are both down by double digits this month.

“With omicron coming along and the U.S. economy stalling a bit, a lot of macro funds that use bitcoin as this pro-cyclical inflation hedge have decided to take profits throughout December,” Brian Kelly, CEO, and founder of digital currency investment firm BKCM told CNBC.

According to Lou Kerner, a partner at Blockchain Coinvestors, crypto’s decline is caused more by environmental, social, and governance concerns.

“Today ‘proof of work’ from the [cryptocurrency] mining machines is looked upon negatively by a lot of the investment community because of the energy it consumes,” Kerner told CNBC. “But if you dig deep, much of the energy is energy that couldn’t be used for anything else. Relative to the massive value we are getting from it, the energy I think will become much less of a concern next year.”

Additionally, stocks that hold/mine cryptocurrency have seen steeper declines than the coins themselves. MicroStrategy is down 21% this month, while Riot Blockchain has fallen 38%. Marathon Digital declined 31%. The coins and stocks are closely correlated in the minds of investors, something Kerner sees changing.

“We are on the cusp of a deep understanding by institutional investors of the different companies and what they actually do and the economics of the businesses,” Kerner said. “It’s still hard for most investors to wrap their head around mining. It’s a small part of the market, so you don’t have a lot of institutional investors devoting massive amounts of time to it. It’s easier for them to just look at it like a basket.”

“You’ll see a lot of other coins, whether they be in the metaverse, gaming or decentralized finance do really well,” Kelly said. “The venture capitalists, new money, and funds like mine are focused on those early growth opportunities.”

Source: CNBC