The cryptocurrency market has turned bright red on a day that will be remembered in history: Russia has begun the invasion of Ukraine, generating a situation of great uncertainty that is hitting all markets squarely and taking ahead the prices of risky assets such as cryptocurrencies (bitcoin, ethereum…) or shares.
Since 2020, bitcoin and other cryptocurrencies have behaved as a risk asset, even keeping an intense relationship with the movements of stock indices such as the S&P 500, as revealed by the latest research by the International Monetary Fund. This correlation rules out any resemblance between bitcoin and gold (the safe haven asset par excellence), today is further proof of this.
If this year is going to be a day of severe risk aversion, this is it. Investors have once again sought refuge in gold, which has risen about 2% and touched the 2,000 dollars per ounce, although at the close of the European market it has deflated. In contrast, bitcoin has dropped more than 9% and fallen to $34,800 per unit (later declines have moderated to 6%, above $36,000), while the fix on ethereum it deepened to 12% and then 9% to the $2,400 zone.
Risk assets vs safe haven
However, it is essential to clarify that being a risk asset is not negative per se. These are assets that tend to outperform when the economy is growing and uncertainty is low because they benefit more from an improvement in economic activity. Cryptocurrencies or stocks are risky assets.
Conversely, it is understood by active shelter those investments that in times of uncertainty, economic recession or financial crisis (periods of economic risk), may be able to maintain stability or even increase their prices. This is the case of gold, the Japanese yen or the US dollar.
“As crypto assets have become more attractive to institutional investors, they are behaving more like a risk asset. Crypto assets and US markets are moving together like never before,” explains Simon Peters, expert in cryptocurrencies from eToro. “In my opinion, it seems that investors are positioning themselves for a further drop in crypto assets. Investors are now leaning towards safe havens like gold to overcome this short-term uncertainty,” he adds.
Going back to risky assets, BNB and XRP cryptocurrencies They also fell about 12% in the hectic morning of this Thursday, while Solana left 9%. Cryptocurrencies once again demonstrate that they have little or nothing to do with a haven asset. The declines of the ‘crypto’ universe have no exception on this day.
How far will bitcoin fall?
The correction in the cryptocurrencies had already been taking place in recent weeks along with that of the global stock markets. Moscow’s attack on Ukraine has been the chronicle of a death foretold that has battered the markets in recent weeks. US intelligence services had been warning of an imminent attack on Ukraine for some time.
Oanda analysts note in a morning note that bitcoin is suffering even more after falling 15% since last Thursday. “Risk aversion has weighed heavily on cryptocurrency And, in the absence of a significant improvement in Ukraine, we could see more pressure on it and other risk assets.”
With bitcoin back below $40,000, attention turns back to recent notable levels, how are the 33,000 dollars. But the great level is still histhe 30,000 dollarswhich has been key for many months, say these experts.
“Focusing on the main cryptocurrencies, we should be aware of the annual lows in Bitcoin ($33,076), an area that if lost would give downward momentum to the critical level of $30,000, a floor created between May and July of the year past,” agrees Diego Morín, an IG analyst.
“We would have the same situation the ethereum, with the sighting of the support of the 2,160 dollars (annual minimums), therefore, if the supply continues with the current strength in the face of this conflict, we could have a test of the support of $1,800, the minimum for 2021,” adds Morín.
“Now it is too soon to know what will happen to cryptocurrencies with the current crisis, as with the rest of the assets, since uncertainty could continue to create a selling panicbut everything will depend on the performance of the process carried out by the countries involved, with a diplomatic channel right now broken”, concludes the IG expert.
“If we continue to see a drop in price, the first thing to note is that even with all of this, we still haven’t hit the lows seen in the middle of last year following the crackdown on bitcoin mining in China, at which point where we saw the price drop to as low as $29,000-30,000. This would be the first area to watch and see if any significant buyers step in,” comments eToro’s Peters. “Historically, most geopolitical crises have had minimal repercussions on the global market in the long term, and the threat is often more significant than the event itself,” she stresses.
The economic consequences of the conflict between Russia and Ukraine will come in three different phases
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