The concerns around the delta variant of the corona virus are increasingly affecting the financial market. Some analysts fear that a similar scenario could be repeated as in March 2020, when the pandemic caused the prices of stocks, cryptocurrencies and other forms of investment to collapse dramatically worldwide.
Delta variant unsettles investors
Because the delta variant is spreading more and more and is already the dominant form of the corona virus in Germany, for example. The tricky thing here is that vaccinated people can not only get infected with the delta variant, but can also transmit it to others.
For example, a report by Public Health England (PHE) shows that vaccinated people are also highly contagious. The difference, however, is that the risk of infection decreases in a shorter time than in unvaccinated people.
In addition, concerns are spreading in financial circles that the corona virus could form a mutation resistant to vaccination. The consequences could be dramatic. Because if vaccination no longer offered protection, the politicians would probably have no choice but to impose a new lockdown and close shops to bring the spread of the pandemic under control.
New lockdown as a shock to the economy?
A “shutdown”of the global economy is probably the worst-case scenario for financial markets. Because when listed companies suffer losses in sales, this usually quickly becomes noticeable in a strong price correction. Investors are then threatened with a sharp loss in their investments.
This is still a purely speculative scenario that does not have to happen in this way. But developments in the financial markets are often determined by expectations for the future-in both a positive and a negative sense. The best example of this is the rapid recovery of the markets after the Corona crash in 2020.
The hope for the early availability of a vaccine alone contributed significantly to the V-shaped recovery of the courses. And not only that. Optimism for a brighter future drove both stocks and cryptocurrencies to an unrivaled rally and new historical records in the midst of the pandemic.
The fear of a difficult future with the delta variant and rising infection numbers could trigger the exact opposite price movement in the markets. Especially since autumn and winter are still ahead and leading immunologists expect a sharp increase in the number of infections.
“The market is worried because of the global delta wave,” says foreign exchange expert Antje Praefcke of Commerzbank about the mood among investors, as reported by Handelsblatt.
US dollar benefits from investor fears
However, in their opinion, there is also a profiteer of the crisis mood. The US dollar as a world reserve currency can gain strength from the tense mood. This is reflected in the exchange rate against the euro. Thus, the euro rate today clearly fell below the mark of $ 1.17. At times, the euro even traded only at 1,166 dollars. This is the lowest level since November 2020.
So, an increasing fear among investors could lead to the withdrawal of investments from assets such as stocks and cryptocurrencies and reallocation to the US dollar. Thus, investors may want to pre-empt a sudden drop in prices in the markets.
The “Black Swan”event of the corona crisis in March 2020 shows how quickly a sharp correction can take place. For example, the German stock index Dax plunged from around 13,750 dollars to below 9,000 dollars in just one month. A minus of around 35 percent.
The correction was similarly severe on the US stock exchanges. The S&P 500, for example, with 500 of the largest American companies, fell from just under $ 3,400 to $ 2,300, a decline of 32.5 percent.
The correction in the crypto market was even more serious. The lead currency Bitcoin slipped from more than $ 10,000 to below $ 5,000 within a short period of time, a drop of well over 50 percent.
The US dollar, on the contrary, gained strength at the same time. For example, for 1 euro there was only 1.08 dollar at times. In the following year, however, the signs turned around again. Stock and crypto markets went up sharply, while the dollar weakened significantly. Thus, the exchange rate of the euro in relation to the dollar increased to as much as 1,23 dollars.
Bitcoin currently still bullish
Is the current strength of the dollar a warning signal that the next crash of Bitcoin & Co. will soon occur? It may be too early to make a clear statement. What is clear, however, is that investors in the financial markets are feeling uncertainty and are probably increasingly looking for security in the dollar.
In the coming weeks and months, it will become clear whether the scare scenario will come true for Bitcoin buyers or whether it is just a temporary strength of the dollar.
Basically, the fundamentals for the crypto market continue to seem positive. Thus, in recent weeks, BTC/USD has managed to turn the tide, rising from below $ 30,000 to more than $ 48,000 in a strong rally.
However, in recent days, the upward movement has stalled somewhat and the Bitcoin price has corrected slightly. Thus, BTC / USD is trading at around $ 45,700 at the time of publication. Kryptoszene.de had investors pointed out in the analysis that strong resistance is expected in the area of $ 47,000.
BTC Better to park in Stablecoin?
However, there is no reason to panic to sell his BTC. Because a really strong correction has not yet been shown. However, those who are afraid of a large correction in prices do not necessarily have to exchange their cryptocurrencies for FIAT currencies such as the US dollar.
An alternative is to temporarily “park”your BTC in a stablecoin like Tether, BUSD or USDC. Because these stablecoins are directly linked to the dollar price and thus independent of the price fluctuations of Bitcoin.
However, the stablecoins do not all necessarily have the best reputation. For example, the stablecoin Tether has faced legal investigations, since it is in the room to what extent the cryptocurrency USDT is actually covered by real dollars. The crypto exchange Binance, which issues the BUSD, had also recently hit the headlines negatively, as kryptoszene.de reported.
However, the Bitcoin bulls are already convinced that it is the best option in the long run to keep its BTC, even if there will be corrections every now and then. For them, Bitcoin is much more than an alternative form of investment to the dollar.
The Bitcoin itself, according to the vision of the bulls, should once become the world reserve currency. Because in contrast to the dollar, BTC is only available to a limited extent and should therefore be a better inflation protection.