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Risk Off: Stocks and Crypto Assets Sell Off Around World After Moderna CEO Says Existing Vaccines Will Struggle Against Omicron

Risk Off: Stocks and Crypto Assets Sell Off Around World After Moderna CEO Says Existing Vaccines Will Struggle Against Omicron

risk off

A syringe is loaded with Moderna vaccine at the Isabel Zendal Hospital in Madrid, Spain, Nov. 29, 2021. The new potentially more contagious omicron variant is in European countries after being identified in South Africa, leaving governments around the world scrambling to stop the spread. (AP Photo/Manu Fernandez)

Monday’s crypto markets, buoyed by reports that Omicron patients had extremely mild symptoms, gave way on Tuesday to a risk-off scenario with investors around the world seeking safe havens after the CEO of Moderna warned of a significant drop in vaccine effectiveness against the new covid variant.

Investors typically move coins to exchanges when they intend to liquidate their holdings, Omkar Godbole wrote for Coindesk. Some crypto investors seem worried about a possible extended price drop and appear to be transferring coins to exchanges, according to blockchain data provider Glassnode, which reported an increase in the number of coins held in exchange addresses.

Renewed uncertainty of the coronavirus trajectory has torpedoed the recovery in risk assets. U.S. President Joe Biden said the new variant is a “cause for concern” but “not a cause for panic.”

Bitcoin, long promoted as a safe haven against inflation, fell 2.5 percent to less than $56,000, while futures tied to the S&P 500 dropped by 1.2 percent, erasing all of Monday’s gains within an hour. The yield on the U.S. 10-year Treasury note penetrated Friday’s low of 1.47 percent as investors flocked to government bonds for safe-haven demand. Gold, the Japanese yen and Swiss franc saw classic risk-off action, U.K.’s CityIndex reported.

Risk-on risk-off theory refers to changes in investment activity in response to global economic patterns. In a risk-off investment phase, investors become risk intolerant and try to reduce risk by selling existing risky positions and moving money to either cash positions or low/no-risk investments such as U.S. Treasury bonds. Conversely, when risk is perceived as low, investors tend to engage in higher-risk investments, according to Investopedia.

The high number of Omicron mutations on the spike protein, which the virus uses to infect human cells, and the fast spread of the variant in South Africa suggest that current vaccines may need to be modified next year, Moderna CEO Stéphane Bancel told Financial Times. Current vaccines are likely much less effective against the new variant than earlier strains of coronavirus, Bancel said.

The price of Bitcoin crashed nearly 9 percent to $53,600 on Friday after the World Health Organization (WHO) said Omicorn was a variant of concern, before recovering Monday.

Gold climbed higher on Tuesday as investors sought safe havens, Reuters reported. The U.S. dollar index fell 0.6 percent, helping gold advance by making it a cheaper bet for overseas buyers, while U.S. benchmark 10-year Treasury yields hit their lowest in three weeks.

“Futures tumbling after Moderna CEO says vaccines won’t be affective vs new covid strain. And #bitcoin follows suit down $1,500. ‘Hedge’ it is not,” gold investor Aaron tweeted @Silver_Gold_U.

Futures on Tuesday subsequently recovered almost half of what they lost, @Silver_Gold_U acknowledged in a tweet: “I think btc truly can become a hedge vs the USD but I don’t think it is yet. Gold is up – doing what it should do.”

Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?