As Russia declared war on Ukraine early Thursday, the world awoke to a “sea of red” that wasn’t only limited to the financial markets.
Traditional financial markets, as well as cryptocurrency markets, have been declining for the past week, with a sharp drop early on Thursday. Aside from crude oil prices, which have risen to an eight-year high above $100, the majority of stocks have dropped by more than 5%.
The bears prompted by the Russian incursion on Thursday, resulted in a $500 billion crypto market sell-off, with the bulk of cryptocurrencies losing critical support and trading at a three-month low. During early morning Asian trading hours, the crypto market capitalisation fell below $1.5 trillion, a 10% drop.
Bitcoin (BTC) is seen as an inflation hedge, and many people expected its price to remain stable during a crisis. However, Sam Bankman-Fried, CEO of FTX, a worldwide derivative and spot crypto exchange, believes that BTC’s collapse was unavoidable.
Bankman-Fried remarked in a Twitter thread about the market situation that the war has produced a liquidity shortage in the market, leading to sell-offs in both regular and crypto markets. BTC’s price decrease can also be ascribed to its increasing correlation with the Nasdaq and S&P 500, which has recently set a two-year high.
Fundamental and algorithmic investor mindsets, according to Bankman-Fried in regards to Ukrain crisis
Bankman-Fried mentioned currency destabilisation in Eastern Europe. Implying that, as a result of the Ukraine invasion, investors in Eastern Europe may be looking for alternatives. With BTC being an obvious candidate.
Fundamental investors consider market conditions and mood, whereas algorithmic investors prefer facts, he explained.
The market fundamentals point to a purchasing opportunity because Bitcoin is a crisis hedge. But algorithmic investors prefer to sell based on the data and Bitcoin’s link with the equity market.
The present Bitcoin market has reached a midway point, according to this idea. Due to the push and pull between fundamental and algorithmic investors.
The price of bitcoin has begun to rise, climbing above $35,663 from a daily low of $34,459.