The new Omicron variant of COVID-19 is all over the news, but in the crypto community a different Omicron is top of mind: the Omicron token.
The token, which trades as OMIC, just launched at the beginning of November but saw its price soar nearly 1,000% over the weekend, according to CoinMarketCap. The surge came after the World Health Organization named the COVID-19 variant detected in southern Africa in November "Omicron."
So does Omicron (the crypto) actually have anything to do with Omicron (the COVID-19 variant)? Not at all.
"It’s word association,” says Hanna Halaburda, an associate professor at NYU Stern School of Business. "It’s just as unexplainable as meme coins.”
Strange reasons crypto prices soar
Meme coins like Shiba Inu coin — cryptos that are based on memes or started as jokes — have seen their prices soar solely because they get hyped up on the internet. They don't have any actual underlying technology or use; they're just funny, or have the face of a cute dog.
It's really impossible to say exactly what makes someone buy a crypto like the Omicron coin. (Crypto tokens differ from cryptocurrencies like Bitcoin because, unlike cryptocurrencies — which have their own blockchains, the underlying technology that crypto assets are built on — tokens are built on blockchains that already exist.)
Quite possibly, some people may be confused and think the Omicron crypto has something to do with COVID-19 recovery (again: it does not). Others may be interested in this crypto now because because the word is in the news so much, Halaburda says.
Then, people start piling on. Once the price of a crypto rises enough to get on the radar of other investors, momentum takes over and the price often starts to increase even more.
“Popularity breeds popularity as people worry that they might miss out on the next opportunity,” Halaburda says.
This isn't the first time news or popular culture has led to a crypto's prices soaring.
Earlier this year, the Squid token based on Netflix's wildly popular show "Squid Game" surged as high as $2,861 before plunging to $0 as scammers made off with an estimated $3.38 million, according to Gizmodo. Dogecoin, a meme coin based on one of the internet's favorite memes of a Shiba Inu dog, jumped 400% in just one week in April and has continued to capture the attention of the crypto community. There was even a "CoronaCoin" during the early days of the pandemic, a token that morbidly bet on the number of people who fell ill with the virus.
Investors should invest with caution, as these altcoins don’t have the same stability as coins like Bitcoin and Ethereum, says Daniel Polotsky, co-founder and chief advisor of Bitcoin ATM company CoinFlip.
The word association can go the other way too, with non-crypto businesses trying to benefit from crypto mania. For example, in 2017 the Long Island Iced Tea Corp., which makes beverages, changed its name to “Long Blockchain Corp.” In a press release, the company said it was "shifting its primary corporate focus towards the exploration of and investment in opportunities that leverage the benefits of blockchain technology."
The company's stock leapt 200% at the open of trading after the news, CNBC reported at the time, but the success was short-lived. Long Blockchain Corp.'s shares were later delisted as the U.S. Securities and Exchange Commission said the pivot to crypto failed to actually happen.