The double dip in cryptocurrency prices this weekend was attributed to the Omicron COVID-19 variation increasing globally. There is also uncertainty about whether existing COVID-19 treatments and vaccines will suffice to combat it.

Forbes published a Thursday report that Omicron uncertainty is the probable catalyst for a Commitments of Traders report of the Commodities Mercantile Exchange. This report saw a 2000% increase in short positions in futures contracts, from 887 to more then 2,660. Leveraging that uncertainty, and the huge increase in short positions, could have played a role in this weekend’s flash crash that saw a more than 20% decline for several top-10 crypto projects including Bitcoin, as seen in this screenshot from CoinGecko on Saturday morning.

Many crypto investors saw this decline as an opportunity to buy the dip, such as El Salvaror’s president Nayib Bukele who tweeted that his country bought another 150 Bitcoin during this latest drop.

While that post had nearly 10 thousand retweets and 71 thousand likes, one response from the founder of Euro Pacific Asset Management firm, ardent gold investor, and vocal Bitcoin critic – Peter Shiff – blasted Bukele’s move asking, “There’s a lot more dips coming. How much taxpayer money do you intend to waste?”

Schiff’s comment provoked a provocative exchange between the two as depicted in this following screenshot.

Despite Schiff’s assertion, Bitcoin has averaged annualized returns of more than 200% since its creation. Bitcoin traded at $48,818 as of the writing and had fallen 1.32% in 24 hours. El Salvador now has 1,270 Bitcoin after this purchase.

To The Flipside

• Buying the Bitcoin dip repeatedly has been a successful strategy that has added tens of millions in profit to El Salvador’s public coffers.
• These funds were used to construct schools and animal shelters.

Why you should care

Although the Omicron strain seems to be the cause of the recent decline, it may also have been driven by the extraordinary rise in short-term leverage positions by 200%. We need to remember that traders can exploit bad news in order to profit as cryptocurrency adoption increases.

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