How Will the Russian Ukraine Conflict Impact the Crypto Market?

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Russia’s invasion of Ukraine had an immediate impact on the world’s financial institutions, with even the United States cryptocurrency market experiencing a ripple effect.

The conflict has led to volatility throughout global financial markets as investors scramble to find new strategies. The value of some of the most popular forms of cryptocurrencies fell immediately after the invasion.

Freefalling

Ethereum fell below $2,400, its lowest value since the end of January, while Bitcoin dropped under $35,000. Both have risen a bit since the beginning of the invasion, but Bitcoin’s value is extremely vulnerable as it has dropped in value by almost half since November because of general European geopolitical tensions.

Other prominent crypto types, including Shiba Inu, Dogecoin, Dogelon Mars, and Samoyedcoin all dropped in value following the beginning of the invasion. All told, the invasion led to the global crypto market cap decreasing nearly 10% after the invasion to a low of $1.57 trillion. 

Why are cryptocurrency values falling in the United States? Blame the stock market, since cryptocurrency is increasingly correlated with stock market performance. The U.S. stock market has also been volatile during the week of the invasion.

In addition, many investors no longer see Bitcoin and other cryptocurrencies as safe assets because of their tie to the stock market. As stock values rise and fall, it’s likely cryptocurrencies will do the same.

Mitigating Risk

Investors looking for stability within a moment of global instability are turning away from cryptocurrencies and looking at such investments as gold and Treasury securities, both traditional safeguards during stock market turmoil.

The damaged relationship between the United States and Russia is forcing investors to move to risk-averse investments.  

Oanda Senior Market analyst Edward Moya described Bitcoin as the ultimate risky investment asset and said the invasion could lead to a 10% to 15% increase in crypto selling in the short term.

Photo by Karolina Grabowska from Pexels

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