- Russian shelling of Europe’s largest nuclear power plant in Ukraine sent Bitcoin tumbling below US$40,000
- Volumes of Bitcoin traded reflect only a fraction of total volume available, meaning that the long term fundamental trends for the cryptocurrency may be strong despite the volatility as short-term traders see the Bitcoin as a risk asset
While Bitcoin has lived up to its potential hedge against geopolitical turmoil, serving as a possible alternative currency for millions of Russians now thrown off the global financial system, even it is not immune to the prospect of a nuclear disaster.
As Russian shells hit and set fire to buildings at the
News that both Russians and Ukrainians were buying cryptocurrencies, especially Bitcoin, at large volumes in the face of the economic situation caused by the war, saw Bitcoin soar to as high as US$44,000 at the onset of this week, before sinking alongside other risk assets by the end of the week.
While the fire at
The start of last week saw cryptocurrencies outperform stocks by large gains, with the imposition of sanctions driving speculation that Russians and Ukrainians would both turn to digital assets as a means to preserve value.
Nonetheless, Bitcoin’s correlation with other risk assets has ebbed somewhat, with the 50-day correlation between the cryptocurrency and the S&P 500 now at 0.5, with 1 representing two assets moving in perfect lockstep, while zero denotes completely unrelated behavior.
While Bitcoin may yet prove its mettle, the volumes being traded right now do not represent the full stock of the cryptocurrency being held, which is why even a little trading can have an outsized influence on price.
Those traders, as opposed to investors, in Bitcoin at the moment would necessarily see it as a risk asset and trade accordingly, as opposed to the long-term holders of the asset class which see it as a store of value and as a hedge against government intervention.
