War and Crypto : Where Do We Go From Here

War and Crypto
War and Crypto

The past two weeks have been absolutely crazy not just from a geopolitical standpoint but also from the effects that recent events have had on the crypto market and despite how volatile it’s been thus far it’s likely to get worse before it gets better, how this will impact crypto depends on what transpires in ukraine today.

Unless you’ve been living under a rock over the past three weeks you’ll know that russia has invaded ukraine in the early hours of the 24th february the worst appeared to be happening as rockets were launched at many major ukrainian cities russian tanks started rolling it was a tragedy that many had been hoping would not occur but it was happening and it was having massive repercussions for global financial markets. Given that cryptocurrency was one of the few assets tradable at the time of the invasion we managed to get a glimpse of just how a massive geopolitical shock would impact the markets quite unsurprisingly crypto fell like a stone, the entire crypto market cap was down by almost 10% as traders were dumping their holdings in the illiquid hours, of course when the traditional financial markets opened the next day they too were caught up in the collapse.

This left many people questioning whether cryptocurrencies like bitcoin really were a safe haven asset, nothing is more destabilizing than a war and crypto fell almost four times more than stocks, well there could have been a few reasons for this, firstly as we’ve seen over the past two years bitcoin has behaved a great deal more like a risk-on asset that investors place in their more risky buckets those factors that tend to drive equity markets have also moved the crypto markets and sometimes to a greater degree. The correlation has been trending up over the past two years, so market uncertainty drives risk assets lower and not only that but you have to consider the fact that a great deal of the trading that takes place in bitcoin these days is algorithmic it reacts to market data and these automated trading firms will buy or sell bitcoin based on key data trends or other stats.

This war is tragedy and the situation is only going to get worse before it gets better, i do hope that a speedy resolution is forthcoming for the sake of all of those directly affected now there are many things that one can take from this invasion, some will point to the nuances of geopolitics or the fragility of leaders but for me it’s how damn important cryptocurrency is in a time of contact of conflict and strife in uncertain times the centralized financial system that we tend to lean on is exposed as the fraud we always knew it was in both ukraine and russia people are using crypto as a means of protecting their savings and transferring value. A sovereign country has even use dit as a method to fund the war effort something that is completely unheard of.

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