Cryptic trend: Why Bitcoin plummeted as Russia invaded Ukraine
From being a safe haven, the cryptocurrency could be easing into mainstream finance, and sharing its concerns
Bitcoin plunged on Thursday to go below $35,000 as Russian President Vladimir Putin announced a military operation in the Donbas region of Ukraine. The resultant concerns that spooked stock markets worldwide left a dent on the cryptocurrency segment, too.
CoinMarketCap data revealed that there has been an approximately 5 per cent erosion in the total cryptocurrency market cap over the past 24 hours alone, bringing it to $1.6 trillion. The losses mostly came in the immediate run-up and aftermath of the Russian invasion, it said. In fact, in less than half an hour, Bitcoin’s value tumbled from $37,000 to below $35,500.
The biggest fear arising from the Russia-Ukraine crisis is an energy shortage, as Russia is the second largest oil producer in the world. With the West poised to cut off trade ties with the Kremlin, a global energy shortage looks imminent, said experts. These concerns have led to the crash in stock markets.
Also read: Ukraine hit by more cyberattacks, destructive malware
Cryptos have for long been projected as ‘safe havens’ — as a hedge against inflation and economic volatilities. However, the Bitcoin plunge on Thursday could indicate its increasing absorption into traditional finance. That its price movements could so closely correlate with stock markets is a surprise.
Not just Bitcoin, but smaller cryptos that have traditionally moved in tandem with it also fell on Thursday. Ether, for instance, lost 10.8 per cent. Ethereum plunge over 12% and dogecoin, over 14%.
Humbling experience for investors
An analyst at forex firm Oanda, in a note to investors, remarked on the strangeness of the crypto fall, saying: “Many crypto investors have been humbled by the last crash.” “They are hesitant to increase holdings given the tremendous uncertainty for risky assets,” the note added.
A CNBC TV18 report noted that Bitcoin donations to volunteers and hacker groups in Ukraine have risen over the past year amid the looming fear of an invasion. Last week, Ukraine even legalised crypto trading.
Russia, on the other hand, is developing a central bank digital currency of its own, said media reports. The ‘digital ruble’ may let it trade directly with willing partner countries without having to convert it into dollars.
