Crypto Market Plunges As Russia Attacks Ukraine
Russian President Vladimir Putin's announcement that he would launch a military operation in Ukraine sent global markets into a tailspin. On Thursday, Putin declared a military operation in Ukraine, warning that any attempts by other countries to intervene would result in 'consequences they have never seen.'
Dmytro Kuleba, Ukraine's foreign minister, tweeted that the country's larger neighbor had 'started a full-scale invasion of Ukraine' and that the country's towns were being attacked.
Vijay Ayyar, vice president of corporate development at Luno, a crypto platform said, “Risk assets continue to be weighed down by the Russia-Ukraine conflict and tensions. This includes Bitcoin and cryptocurrencies which are currently still very much viewed as a high-risk asset class.”
Major Drop for Important Altcoins
Ether, the cryptocurrency linked to the Ethereum blockchain, fell 10% to $2,373. Meanwhile, Dogecoin was trading at $0.11, down BY over 12%, and Shiba Inu was trading at $0.000022, down nearly 10%. Other coins' performance suffered as well, with values for Solana, XRP, Terra, Avalanche, Stellar, Cardano, Polygon, and Polkadot falling by 8-15%.
Bitcoin's wild swings in recent weeks of growing international tensions have weakened the idea that cryptocurrencies may be used as a safety net in times of crisis. Meanwhile, gold, the classic haven, soared to its highest level since early 2021 on Thursday.
Over the weekend, Bitcoin fell below $40,000 and continued to fall as the Ukraine crisis worsened, contradicting the premise that cryptocurrencies are a haven in times of global uncertainty.
What is Up Next For Bitcoin?
Bitcoin proponents frequently compare it to gold as a safe-haven asset, implying that it may be used as a store of value in times of uncertainty. Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank said:
“Bitcoin’s haven narrative has almost completely fallen apart as the rising possibility of military conflict and the worsening U.S.-Russia relationship puts the wider financial market in risk-aversion mode.”
As more institutional investors continue to trade bitcoin, the cryptocurrency's case as a form of "digital gold" has diminished, and the cryptocurrency's price is becoming more closely associated with changes in traditional markets like stocks.
This week, Hasegawa predicts bitcoin will trade between $32,000 and $43,000. $39,500 is 'first-level support coming into this week,' according to DailyFX's John Kicklighter, but $32,500 'seems more like the point of no return.'
Bitcoin is already trading significantly below its all-time highs of $68,000, which it hit in November 2021, and some investors feel this is the best the cryptocurrency will get for a long time. The next bitcoin bull market, according to Du Jun, co-founder of cryptocurrency exchange Huobi, is unlikely to occur until 2024 at the earliest, when the next so-called 'halving' event is scheduled.
Russia’s Crypto Policy Still on a Hang
Meanwhile, Russia's perplexing crypto policy contributed to the downturn. On February 21, the country's finance ministry said it would consider ideas from the country's central bank on cryptocurrencies as long as they did not contradict its policy, paving the door for laws controlling digital assets. The finance ministry filed legislative suggestions to the government on February 18 that conflicted with the central bank's call for a blanket ban, escalating a simmering disagreement over cryptocurrency regulation in Russia.
Due to the threat that digital currencies represent to financial stability, the Bank of Russia has advocated prohibiting cryptocurrency trade and mining. The finance ministry, on the other hand, wants legislation that controls cryptocurrencies and allows them to be used as an investment tool but not as a payment method. The draft legislation proposed by the finance ministry intends to establish a legal market for digital currencies.
One proposal is to require client identification for transactions involving the purchase or sale of bitcoin, which might jeopardize one of the cryptocurrency's main selling qualities - anonymity. Other ideas include requiring international cryptocurrency exchanges to obtain a license in Russia and implementing financial literacy tests to determine how much money individuals are allowed to invest.