Here's how Bitcoin and this top altcoin are responding to the Omicron variant

The top cryptos failed to live up to their safe haven status on Friday.

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A Bitcoin symbol atop a spring, indicating the uncertain direction of cryptocurrency as a commodity

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Bitcoin (CRYPTO: BTC) and the world's number 2 crypto, Ethereum (CRYPTO: ETH), have come roaring back over the past 5 hours after posting heavy losses on Friday.

Bitcoin is currently trading for US$57,401 (AU$80,842), up 5.6% in 24 hours. But as previously said, most all of those gains have come inside the past 5 hours. The token was unable to begin to recoup Friday's losses until very recently, according to data from CoinMarketCap.

The same story is playing out with Ethereum. One Ether is currently worth US$4,318. That's up 6.6% since this time yesterday, with the big bounce also kicking off some 5 hours ago.

So what's happening with the world's top 2 cryptos?

Omicron knocks the virtual stuffing out of Bitcoin and Ethereum

By now, we're sure you've heard of Omicron. No, not the 15th letter in the Greek alphabet. But the newest unwanted COVID variant.

In a nutshell, the variant was identified late last week in South Africa. It's since been confirmed to have spread across much of the world. Here in Australia, authorities believe as many as 4 travellers who recently arrived from Africa may be carrying the variant.

The medical jury is out – and will remain out for at least several more weeks – about just how concerning the new mutation is.

Initial reports that it may be far more infections and potentially have a higher mortality rate than Delta, sent global share markets spiralling lower on Friday.

And in a blow to crypto enthusiasts who spruik Bitcoin and Ethereum as safe havens in times of market uncertainty, akin to gold, neither crypto lived up to this billing.

Gold edged higher on the global fears, gaining 0.8% to trade for US$1,803 per ounce.

Bitcoin went the other way. Fast.

In roughly 1 hour Bitcoin fell from US$59,427 to US$53,625. That's a loss of 9.8%. In 1 hour.

During that same hour Ethereum plummeted from US$4,550 to US$3,960, down 13%.

Why are these cryptos gaining now?

Bitcoin and Ethereum's rapid turnaround earlier today are broadly in line with an improvement in the bearish sentiment in global share markets. The S&P/ASX 200 Index (ASX: XJO), for example, has pared its early morning losses of 1.2% to currently be trading down only 0.3%.

That's likely due to some calming words coming out of South Africa. According to South African medical authorities,  patients presenting with the Omicron variant don't have severe symptoms to date.

While that looks to have soothed investors' initial panic, the World Health Organization has cautioned it's early days yet. The WHO that the patients presenting in South Africa with Omicron so far have been young, an age group that generally has milder symptoms with Delta and the original strain as well.

What the experts are saying on the haven status of Bitcoin

Investors who bought Bitcoin as a haven to hedge their portfolios during times of share market turbulence will have been disappointed by Friday's performance. And indeed the correlated bounce back today.

However, those moves didn't come as any surprise to Craig Erlam, senior market analyst at Oanda Corp. According to Erlam (quoted by Bloomberg):

I never bought into Bitcoin as a haven. You learn what's a safe haven when markets turn sour, and today Bitcoin plummeted. What we saw today is it's a risk asset and it behaves as such.

Some analysts say it's still too soon to determine whether Bitcoin, Ethereum and other leading altcoins can serve as an effective hedge, like gold.

Ross Mayfield, investment strategist analyst at Baird, said, "The evolving debate on what kind of asset crypto and Bitcoin will prove to be, whether it's an inflation hedge and volatility hedge, or whether it's just like a high beta risk asset are still in flux."

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Bitcoin and Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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