Investors reacted to the Russian attack on Ukraine with sell-offs. Cryptocurrency prices are now on the rise again. Why does it counteract Bitcoin’s claim to self? Check Bitcoin Code to get a piece of detailed information about bitcoin trading.
It only took bitcoin a day to digest the Russian attack on Ukraine. Daily, the oldest and best-known cryptocurrency is up almost nine per cent and was last listed at around $38,500. Cryptocurrencies in the back rows grew in double digits in some cases. Digital currencies have almost recovered their losses since the Russian attack on Ukraine.
On Thursday, like all other assets, cryptocurrencies reacted sensitively to the worsening situation in Ukraine. Bitcoin slipped to a reasonable $35,300; analysts were already warning of a drop to $30,000. The recovery that followed was roughly in step with the performance of technology stocks. Since yesterday’s low point, the US technology index Nasdaq had also risen again, by almost seven per cent.
It is difficult to say why Bitcoin is picking up so strongly again despite the war in Europe. One reason could be that the sell-off was exaggerated, and a correction is now taking place. Bitcoin can look back on a young history; it has become relevant for the financial markets in recent years. So far, the cyber motto has had no experience with geopolitical crises. But the recent price behaviour shows that the narrative of bitcoin as a haven is a myth. A real crisis currency would offer investors stability – and Bitcoin doesn’t do that.
Many crypto investors see Bitcoin as a digital counterpart to gold. There are some parallels. Both asset classes are limited, gold due to its natural occurrence, the Bitcoin qua limitation in the code. Proponents of cryptocurrency see it as a crisis currency, just like gold. The precious metal has earned this reputation over the centuries. Even now, many investors are fleeing into the asset class, causing the price of gold to climb.
Significantly worse performance than gold
This discrepancy is particularly evident in a year-on-year comparison. Gold is up a good 7.6 per cent, while bitcoin lost a whopping 17.7 per cent. Of course, growth rates were higher in previous years. However, the latest developments in inflation and the Ukraine crisis show that Bitcoin is less suitable as a crisis currency.
After falling steadily over the past two weeks as the situation in Ukraine worsened, the index went upwards again. Bitcoin may have now bottomed out. However, cryptocurrencies are highly volatile.
The “Fear and Greed” index is attractive: In January, when concerns about rising interest rates caused cryptocurrency prices to plummet, the index peaked at 11 – so the fear was even more significant than now.
On the other hand, for Ukrainian resistance groups, the relevance of Bitcoin and Co. is growing. Approx. Million dollars went into some non-governmental organizations and resistance groups. Ukrainian hackers are also being supported to target Russian government agencies. Bitcoin transactions are famous for crowdfunding campaigns because the sender and recipient are challenging to determine.
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Keep calm, advises the veteran. Just don’t panic now. Instead, think in the long term. “History shows that the stock exchanges quickly overcome political shocks,” says Jens Ehrhardt. And he needs to know. Ehrhardt will be 80 years old in March. He is the grand seigneur of German asset managers, the founder of DJE Kapital in Pullach – and in almost 60 years on the stock exchange, he has already experienced several money quakes caused by wars and conflicts: Vietnam, Prague Spring, the Six-Day War, Yom Kippur, Kuwait, Iraq, and Crimea. So now Putin is making a grip on Ukraine.
Money is power, and a financial system is a political tool. Finally, more and more people realize the risks and dependencies: when governments get cornered, citizens often lose out – any centralized money can be devalued, taken, frozen or blocked.
The value of bitcoin is that it is decentralized, so that is not possible. There is no central authority or ruler. It offers certainties and guarantees that are impossible to change despite price volatility.