- Bitcoin led broad-based gains in cryptocurrencies as digital asset reasserted themselves as havens and emerged as a potential vehicle for ordinary people to get around sanctions, amid the intensifying conflict between Russia and Ukraine.
- Cryptocurrencies have proved at a time of crisis that they are immune to government control and therefore not beholden to any actions and more investors around the world are watching this narrative unfold in real life.
With shells raining down on Ukraine’s second largest city Kharkiv, investors are heading for cover and some have turned to Bitcoin as well as other cryptocurrencies.
Extending a two-day rally, Bitcoin led broad-based gains in cryptocurrencies as digital asset reasserted themselves as havens and emerged as a potential vehicle for ordinary people to get around sanctions, amid the intensifying conflict between Russia and Ukraine.
Part of the demand of course is the near-collapse of the Russian ruble as Western sanctions begin to bite.
Ordinary Russians who have seen their banks and ATMs emptied out of whatever cash that remains have been rushing to convert rubles into anything of value, from electronics to cryptocurrencies as the currency falls by 30%.
The Western freeze of the Russian central bank has hamstrung the ability of Moscow to prop up the ruble and rather than wait for something to be done, ordinary Russians, are buying more cryptocurrencies,
A recent study by the Kremlin suggests that as many as 12% of Russians already own cryptocurrencies, but the true number may be much larger.
Bitcoin pushed past US$44,000 and Ether crossed US$3,000 overnight before retracing breaking above their 50-day moving averages.
Burnishing the censor-proof credentials of cryptocurrencies, even centralized exchanges, which are the most vulnerable to regulatory intervention, have declined to freeze transactions of ordinary Russians, and only to those subject to sanctions.
Cryptocurrencies have proved at a time of crisis that they are immune to government control and therefore not beholden to any actions and more investors around the world are watching this narrative unfold in real life.
While many analysts had long suggested Bitcoin could serve as a useful assets during geopolitical turmoil, that theory had never been proved, until now.
Cryptocurrencies have outperformed amidst increasing volatility that has seen U.S. and European stocks fall and Wall Street’s “fear gauge” the VIX has also spiked to its highest level in weeks.
Speaking to Bloomberg, Mike Novogratz, CEO and founder of cryptocurrency platform Galaxy Digital noted,
“We’ve never had a group of nations in essence confiscate real estate from Russian tycoons, taking a country’s money. That’s why Bitcoin was created, because people don’t trust governments. This is a big deal – in a lot of ways, this is starting the acceleration of de-dollarization of the world.”
Nevertheless, Bitcoin’s correlation with stocks, in particular the S&P 500 remains elevated at 0.55, with 1.0 representing two assets moving in lockstep, according to data from Bloomberg.
But the association of cryptocurrencies with risk assets may have taken a breather for now, as they emerge as a nascent asset class and prove their value in a real world
