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Major cryptocurrencies slumped on Friday as a new coronavirus variant sparked concerns across the broader market.
Bitcoin (BTC-USD) was down 5.7% to trade at $54,629 (£41,007). It's down about 20% from its all-time high of roughly $69,000, which it hit earlier this month.
Ethereum (ETH-USD), the world’s second biggest crypto by market cap, plummeted 6% and was trading at $4,051, even as US banking giant JPMorgan Chase (JPM) said the crypto could be a better investment than bitcoin.
“The rise in bond yields and the eventual normalisation of monetary policy is putting downward pressure on bitcoin as a form of digital gold, the same way higher real yields have been putting downward pressure on traditional gold,” the JPMorgan report said.
“With ethereum deriving its value from its applications, ranging from DeFi [decentralised finance] to gaming to NFTs [non-fungible tokens] and stablecoins, it appears less susceptible than bitcoin to higher real yields,” it added.
Investors seem concerned about the new COVID-19 strain discovered in South Africa.
The World Health Organization is keeping an eye on this new variant with many alterations to the spike protein, as COVID cases increase in the run up to the holiday season.
The UK government said six African countries would be added to its travel 'red list', with flights being temporarily banned.
Farah Mourad, senior market analyst at XTB, told Yahoo Finance UK: "Crypto markets are down as a global selloff seems to be underway and risk aversion increases."
"Investors are trying to reduce their exposure in the face of the uncertainty surrounding the possible effects of the new COVID variant on the economy and the financial markets, and as central banks’ interventions could come sooner, reducing the attractiveness of digital currencies."
Earlier this week, India said it will introduce a new bill that would see it banning the majority of digital currencies.
Read more: Live crypto prices
“The coming weeks may be a little interesting as the same bill that unnerved crypto investors is set to be tabled in the Indian parliament,” said Kunal Sawhney, CEO at Kalkine Group.
“It is then that the real intent of this bill will become public. Either way, it may have an impact, resulting in similar price fluctuations when China banned cryptos.”
He said if India decides to steer clear of any ban and instead go for regulating the space, prices might pick up, but if this major emerging economy chooses to ban these volatile assets, prices may undergo a severe correction just like it happened at the time of China's crackdown.