The collapse of global markets as a result of the war in Ukraine has hit Bitcoin (BTC) and cryptocurrencies in general, prolonging the downward trend that began several days ago. Moreover, cryptocurrencies have become the main victims of the crisis in Ukraine, by falls and by reputation. In fact, BTC has already lost 50% from its record high, and analysts warn that investors are positioning themselves for a further fall. Kimberly Rosales, who is also closely watching this behavior, makes use of her knowledge in digital assets in order to explain the repercussions on cryptocurrencies as a result of this Russian invasion of Ukraine.
As soon as the invasion was known, BTC fell with unusual force, as it lost 9%, to touch a low of $34,459, its lowest value in a month. But it was not the only one, as some, such as Cardano, fell more than 15%, while Ether lost 12%.
This fact generated diverse opinions, such as that of Vitalik Buterin, co-founder of Ether and Ethereum, who does not see with “bad eyes” the fall of cryptocurrencies, as he argues that this could eliminate unviable crypto projects, decreasing senseless speculation.
“The drops registered in the last hours add to the setback already accumulated so far this year, which is nullifying the claim of many investors that this type of asset serves as a refuge from gold in times of volatility,” explains Rosales.
Risk assets continue to be weighed down by the conflict and tensions between Russia and Ukraine. This includes BTC and cryptocurrencies, which are currently still considered a high-risk asset class. In this context, Edward Moya, senior market analyst for the Americas at Oanda, said in a note to clients on Thursday that many investors “are hesitant to increase holdings given the tremendous uncertainty for risk assets.”
It is precisely because of this elevated volatility that cryptocurrencies are in the crosshairs of several governments, even more so considering that they are seeing huge uptake among retail investors as well as institutional investors.
“Because of this high volatility, cryptocurrencies are in the sights of several governments,” Rosales assures. “All of this means that they continue to be seen as a potential risk to global financial stability, more than anything else because of the huge acceptance they are having among retail investors and also among institutional investors, to the point that they are starting to be seen as a potential risk to financial stability.”
To get an idea of the magnitude of the fall, if the market as a whole is taken into account, at the worst time of the day, the value losses were estimated to be around $1.5 billion. Subsequently, there was some recovery in prices due to so-called opportunity purchases, which raised the price to $36,200, reducing the decline to 6%.
Risk assets continue to be weighed down by the conflict and tensions between Russia and Ukraine. The fact that worries analysts and investors a lot is that the so-called “fear and greed” index pointed out that it was possible to foresee a greater fall in the next rounds, as it was heading rapidly to what is called an “external fear” zone.
In other words, it shows that investors are selling their positions to seek refuge in safer assets such as gold, whose price has been rising systematically to exceed $1,900.
In the latest world maelstrom – US/Russia/Ukraine – BTC, the asset that is supposed to be the answer to all questions, has quietly weakened and is noticeably underperforming its arch-nemesis, gold.
Many analysts, including Rosales, predict that BTC could fall below $30,000 (a level it hasn’t seen since July) as traders increasingly shift to gold, which could push the bullion to an all-time high. “Geopolitics has, for now, replaced inflation as the main driver of both traditional and crypto markets,” says Rosales.
For analysts who base their forecasts on technical analysis, the current BTC price correction could continue. Their estimation is made on the basis of the so-called “Elliott Wave Theory.” Precisely, this bearish outlook appeared when BTC fell below $35,000.
The theory, which divides a price cycle into two sets, one consisting of five uptrending momentum waves and the other with three follow-up corrective waves, points to the possibility of the price falling to $25,500 within this year.