• Investors have shifted away from riskier investments such as cryptocurrency due to the emergence of the Covid omicron variant.
• ESG investors are also concerned about the use of energy in cryptocurrency mining, according to Lou Kerner, partner at Blockchain Coinvestors.
• Cryptocurrencies tied to the metaverse, gaming and decentralized finance are also pulling investor interest and dollars away from bitcoin, ethereum and ripple, according to Brian Kelly of BKCM.

The rising number of cases of the Covid omicron variant in the U.S. are a major catalyst for the falling cryptocurrency prices in December, according to investors and analysts.

Ethereum is up more than 400% in 2021 but on pace for its worst month since March 2020 as investors reassess their exposure to riskier assets following the emergence of the omicron variant.

Bitcoin is on pace to double the S&P 500, and ripple is more than 200% higher year to date, but both are also down double digits this month.

"With omicron coming along and the U.S. economy stalling a bit, a lot of macro funds that use bitcoin as this pro-cyclical inflation hedge have decided to take profits throughout December," Brian Kelly, CEO and founder of digital currency investment firm BKCM, told CNBC.

ESG — or environmental, social and governance — investing and concerns over energy use have also been a catalyst in recent crypto declines, according to Lou Kerner, partner at Blockchain Coinvestors.

"Today 'proof of work' from the [cryptocurrency] mining machines is looked upon negatively by a lot of the investment community because of the energy it consumes," Kerner told CNBC. "But if you dig deep, much of the energy is energy that couldn't be used for anything else. Relative to the massive value we are getting from it, the energy I think will become much less of a concern next year."

Stocks that hold or mine cryptocurrency saw deeper declines than the assets themselves in December. MicroStrategy is down 21% this month, while Riot Blockchain has fallen 38%. Marathon Digital declined 31%. The coins and stocks are closely correlated in the minds of investors, something Kerner sees changing.

"We are on the cusp of a deep understanding by institutional investors of the different companies and what they actually do and the economics of the businesses," Kerner said. "It's still hard for most investors to wrap their head around mining. It's a small part of the market, so you don't have a lot of institutional investors devoting massive amounts of time to it. It's easier for them to just look at it like a basket."

Kelly said he is bullish on bitcoin and believes it could hit $100,000 by the end of 2022 but that the emergence of the metaverse is pulling investor interest.

"You'll see a lot of other coins, whether they be in the metaverse, gaming or decentralized finance do really well," Kelly said. "The venture capitalists, new money and funds like mine are focused on those early growth opportunities."