After the stock market’s Thursday dip, Bitcoin, Ethereum, and Solana all followed suit, causing cryptocurrency investors to suffer as well.
The Ukraine war is the latest indication that digital currencies like Bitcoin are not isolated from the real world, and the intimate link between cryptocurrency and the stock market was formerly assumed to be independent.
Russia’s invasion of Ukraine sparked a global sell-off in the stock market Thursday morning, causing investors to flee to more secure investments. All three main U.S. stock indexes sank more than 2% on Thursday morning, accentuated by a jump in commodity prices, including oil, wheat, and steel.
While the stock market continues to plummet, gold continues to rise, while Bitcoin and other cryptocurrencies continue to fall at an even quicker rate.
After a roughly 8 percent drop on Thursday, the cryptocurrency market lost more than $150 billion in 24 hours. There were some currencies that plunged by as much as 10%, including Solana and Shiba Inu,
Sam Bankman-Fried, the CEO and founder of FTX, a prominent cryptocurrency exchange, tweeted that algorithmic trading is a key factor in the decline in cryptocurrency prices. Trading cryptocurrency using predefined algorithms is known as algorithmic trading.
Rather than relying on new data, these AIs tend to take their signals from how the stock market is trending, and in addition to that with the use of these techniques, traders can deduce when is the right time for investing. Cryptocurrency prices have fallen in tandem with conventional financial assets because of the Ukraine situation that has caused investors to flee the stock market.
Federal Reserve policies, such as increased interest rate increases, have had a role in promoting both digital and real-world asset selloffs in the first quarter of 2022.
Bitcoin Price Increases Due To The War
Because of Russia’s continued aggression against Ukraine and the United States’ escalation of sanctions, Bitcoin’s value has increased by as much as 16 percent.
In the past 24 hours, Coin Metrics reported that the cryptocurrency has gained 6 percent to $44,219.50. After the Russian invasion of Ukraine last week, the price of cryptocurrencies fell, causing a sell-off in other risky assets like equities.
There was a 5.4% increase in the price of Ether to $2,980.38. The digital asset had already risen past $3,000 earlier in the day.
According to some observers, Russians used crypto to avoid sanctions, and Ukrainians were seeking to transfer money out of their respective nation, which fueled the spike in the cryptocurrency market.
It all started when the United States placed new sanctions on Russia’s central bank on Sunday, in addition to the penalties already put in place on Russia’s oligarchs and its sovereign debt, in an effort to isolate the country from the global financial system.
There’s a good chance that Russian market players would utilize crypto to avoid sanctions since it’s simpler to trace on-chain transactions than cash, according to Valkyrie Investments CEO Leah Wald.
It would be simpler for the Russian government to censor itself if it utilized bitcoin to control its central bank reserves, venture partner Michael Rinko of AscendEx said. As a result of Bitcoin’s open nature, anybody could witness all monetary movements into and out of the central bank’s bank accounts.
If Europe and the United States urge the main exchanges—Coinbase, FTX, and Binance—to ban the addresses affiliated with Russia, “no other major exchange would want to engage with money that came from these addresses,” Rinko added. Therefore, any bitcoin or other cryptocurrency that came into contact with a Russian account would be subject to seizure.
According to Kaiko statistics, transactions on centralized bitcoin exchanges in the Russian ruble and Ukrainian hryvnia rose to their greatest levels in months when Russia invaded.
For the stablecoin Tether’s ruble-denominated Tether volume is more than twice as high as bitcoin’s volume, which shows that stablecoins might play a more vital role as a safe haven asset or in bypassing sanctions, according to the research director of crypto data provider Kaiko.
Reasons BTC Price Increases
Bitcoin’s value has fallen to $34,904 on the 24th of February. As of this writing, the global cryptocurrency market has reclaimed its $2 trillion valuations, surging more than 10% in the previous 24 hours alone.
In light of the present global crises, experts believe the rise in Bitcoin’s value is due to the rise of crypto as an alternative financial system.
Many economists believe that markets often react to impending events, whether it be a government change, the introduction of a new product, or even a global disaster like the current conflict. This might also be seen in the present crypto market patterns.
Also Read: 5 Important Terms Related To Bitcoin
“The battle was expected, and the markets responded while anticipating the consequences, resulting in severe volatility in the market. After the commencement of the war, the market begins to recover, but only after a short period of time.
Gaurav Dahake, CEO & Founder Bitbns, remarked that one may compare this to how the equity markets were affected by analogous times like Palestine, Vietnam, or any other wars—the outcome of which is that stock markets collapsed in the beginning and then began to rise.”