Cryptocurrency Prices Fall in December, Investors Blame Omicron, Climate Change

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The growing number of cases of the Covid omicron variant in the United States is a major catalyst for the decline in cryptocurrency prices in December, according to investors and analysts.

Ethereum is up more than 400% in 2021 but on pace for its worst month since March 2020 as investors reassess their exposure to riskier assets following the emergence of the omicron variant.

Bitcoin is on course to double the S&P 500, and the ripple is over 200% higher since the start of the year, but both are also down double digits this month.

“With the arrival of omicron and the downturn in the US economy, many macro funds that use bitcoin as a pro-cyclical inflation hedge have decided to take profits throughout the month of December,” Brian Kelly, CEO and founder of digital currency investment firm BKCM, told CNBC.

According to Lou Kerner, partner at Blockchain Coinvestors, ESG – or environmental, social, and governance – investments and concerns about energy use have also been a catalyst in recent declines in crypto.

“Today, the“ proof of work ”of the [cryptocurrency] Mining machines are frowned upon by much of the investment community because of the energy they consume, “Kerner told CNBC.” But if you dig deep, a lot of the energy is there. energy that could not be used for anything else. Compared to the tremendous value we’re getting from it, I think energy will become a lot less of a concern next year. “

Stocks that own or operate cryptocurrencies saw larger declines than the assets themselves in December. MicroStrategy is down 21% this month, while Riot Blockchain is down 38%. Marathon Digital is down 31%. Coins and stocks are closely correlated in the minds of investors, which Kerner sees changing.

“We’re about to gain a deep understanding through institutional investors about different companies and what they actually do and the economics of companies,” Kerner said. “It is still difficult for most investors to understand mining. It’s a small part of the market, so you don’t have a lot of institutional investors spending a lot of time on it. It is easier for them to just watch it. like a basket. “

Kelly has said he’s bullish on bitcoin and believes it could hit $ 100,000 by the end of 2022, but the emergence of the metaverse is sparking investor interest.

“You’ll see a lot of other pieces, whether they’re in the metaverse, gaming, or decentralized finance, great,” Kelly said. “Venture capitalists, new capital and funds like mine are focusing on these early growth opportunities. “

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