Russia — Ukraine clash has affected the stock market and crypto market. Will Bitcoin overcome the tragedy? What really made the BTC price fall?
The portfolio is painted Red!
Wars, in addition to killing people, had made the world economy tremble. Any major war not only costs human lives but their financial stability. It was shocking to hear that Russia declared war on Ukraine early Thursday. The attack has let the people suffer. Since the stock markets and crypto assets were already bearish in the past week, this war has made the situation even worse. There were sudden price drops that painted people’s portfolios red. Apart from crude oil, every other asset (Stock and crypto) has lost over 5% in no time.
Russia’sattack on Ukraine triggered the market whales to seel-off their crypto assets worth $500 billion. As a result, many cryptocurrencies have experienced a fall below their three-month low, struggling to get critical trade support. The cryptocurrency market capitalization fell below the one Trillion mark due to a 10% decline during today’s early Asian trading hours.
Though people believed crypto assets provide a hedge against inflation and are not affected by the world economic recession, it was not true. The major crypto-asset Bitcoin failed to show resilience at this tough time.
It makes sense that war made the traditional stocks/fiat currencies go down. But why is even Bitcoin in the picture? Well, the reason is when people have no cash, they sell their crypto assets (BTC) for their needs. This is the sell-off that had put Bitcoin’sprice 12% lower than the previous day.
The Bitcoin price decline is also due to its growing correlation with the S&P 500 and Nasdaq. So when people sell traditional assets, Bitcoin’sprice will go down.
Read about Bitcoin’s price history here.
Will Bitcoin recover from the war’s effect?
Russia’sattack on Ukraine will destabilize Eastern European Currencies and their financial systems. With the current RUB/USD chart, people really cannot trust fiat currencies. So they will surely go for an alternative, and that would definitely be crypto. Just have a look at the chart!
But, the Bitcoin price is decided by two types of investors, namely fundamental investors and algorithmic followers. Fundamental investors act according to the market situation/emotion. At the same time, the algorithmic people analyze the historical data before they make their feet wet. Algorithmic investors are people who follow historical trends.
For the past years, the data state that Bitcoin’sprice is about 80% correlated with S&P and conventional market, with a beta of 4, i.e., if the stock goes down by 4%, crypto will go down by 16%. The fundamental investors are neutral, but the algorithm followers predicted this 16% fall and sold their assets. This might be due to their judgment of the upcoming monetary policy or may be due to the fear of illiquidity in the market. Of course, no one wants to buy illiquid assets. Do we?
But, Bitcoin has not reached the 4x down as predicted by the algorithm followers. We still believe there is hope for cryptocurrency in the ever-changing world. Bitcoin price has started to show signs of recovery as it climbed above $35,663 from a daily low of $34,459.