According to industry insiders, Russia’s invasion of Ukraine last week has increased volatility in the cryptocurrency market even further.
The ramifications of war on the global financial system are just one of the numerous costs of war. Experts are also concerned about a major human toll, particularly in light of Ukrainian President Volodymyr Zelensky’s announcement that more than 100 Ukrainians had been slain on the first day of the invasion. Ukraine’s population have also been thrown off their feet as a result of the invasion, with many attempting to flee the country as Zelensky urges others to prepare to defend their homes against Russian forces and attacks. In addition,
According to experts, as long as the war continues, instability in global financial markets, including cryptocurrencies, would inevitably follow.
According to Doug Boneparth, CEO of Bone Fide Wealth and licenced financial adviser, “There is a significant degree of volatility that comes with war, no matter what asset class you are looking at.” “It will make it that much more difficult for investors to stick to their investment ideas,” says the author.
In the immediate aftermath of the invasion, Bitcoin fell below $35,000 and Ethereum fell below $2,400, however both have since regained in value. Bitcoin has declined by more than 30% since its all-time high of $68,990 in November, owing to a combination of causes including current geopolitical concerns in Europe, rising inflation, and the likelihood of interest rate hikes by the United States Federal Reserve, among others. Ethereum’s price has dropped to its lowest point since late January, and the global stock markets have also fallen as a result of the decline.
With no signs of a slowing in what President Biden termed as a “deliberate act of war” on the part of Russian President Vladimir Putin, cryptocurrency experts warn investors should brace themselves for increased volatility in the near future.
As with typical cryptocurrency volatility, experts advise investors to stick with a long-term strategy in the face of turbulence. Here’s what cryptocurrency specialists have to say about the recent volatility in the cryptocurrency market, which has been triggered by Russia’s invasion of Ukraine.
How Cryptocurrency Experts React to Volatile Cryptocurrency Prices
According to experts, Russia’s invasion of Ukraine has caused risk assets to plummet, while conventional safe havens such as gold and the U.S. dollar have risen in value. In terms of crypto investors, here’s what they believe is now driving the market:
The Cryptocurrency Market Is Following the Stock Market
According to Ben McMillan, chief investment officer of IDX Digital Assets, the rationale for Bitcoin as a “secure” asset comparable to gold is eroding as a result of the cryptocurrency’s volatility and greater link to stock markets. For Bitcoin to see a prolonged climb above $45,000, “a return of investor risk-appetite across asset classes” is required, according to McMillan. “For the time being, it appears that this will be primarily dictated by the unfolding events in Ukraine,” he adds.
Despite the fact that crypto has long been hailed as a financial asset that is uncorrelated from regular financial markets, Boneparth claims that the crypto market is reacting to news of Russia’s invasion of Ukraine in the same way that stock markets are.
According to Boneparth, “my first observation is something that we’ve observed previously, which is that crypto assets, notably Bitcoin and Ethereum, are risk-on assets.” “They’re moving up and down in value just like the stock market.” Watching the stock market plummet overnight and throughout the day today is similar to watching cryptocurrency do almost the same thing.”
Boneparth believes that time will tell whether crypto investors were merely reacting in a knee-jerk manner to the issue at the time of the announcement. Is it possible for [crypto] to decouple itself from its correlation with stocks, or does it continue to follow the same path as equities?” That is something we will find out,” he says.
More Widespread Cryptocurrency Adoption
According to Laura Shin, a crypto podcast presenter and author of “The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze,” mainstream adoption of cryptocurrency is what is causing the crypto market to move more in lockstep with the financial markets. “Whether the crypto die-hards or more macro-driven persons drive the narrative, and whether the crypto traders in leveraged positions get wiped out and take the markets down with them,” she says, will be the determining factor in how the crypto markets perform over the next few months.
Also Read: Predictions For Dogecoin in 2022
Prices Have Dropped Significantly in Recent Months
Since the crypto market has been in a downward spiral for the past few months, Wendy O, a crypto investor and well-known TikToker, believes the current reaction is “pretty normal.” As a result of global uncertainty, she claims, we are witnessing “more volatility bearish price action.” She also claims that unless we are able to break out of Bitcoin’s current downtrend, the market will “continue to see lower highs.”
What Does This Mean for Investors and How Can They Benefit?
Cryptocurrencies are extremely volatile assets, a characteristic that has become even more obvious as a result of Russia’s aggression against Ukraine.
According to industry experts, the greatest thing investors can do right now is maintain their composure and avoid reacting in a knee-jerk manner to market swings. As an alternative, stick to your long-term investing approach. When it comes to developing a long-term plan, Boneparth strongly advises starting now rather than later.
“Be extremely cautious not to make financial blunders that you will come to regret in the road because you either panicked or were unable to cope with the volatility that is currently in effect,” advises Boneparth. “Ultimately, your capacity to remain disciplined and invested will determine whether you will be successful or unsuccessful.”
While there aren’t any urgent changes that crypto investors need make, it’s a good reminder that crypto assets are incredibly volatile in the short term and long term. That’s why most investors should stick to the top two cryptocurrencies, Bitcoin and Ethereum, and only invest what they’re comfortable losing, or no more than 5 percent of their overall portfolio, according to experts.
Always put other vital elements of your finances first, such as putting money aside for emergencies, paying off high-interest debt, and saving for retirement, before putting money aside for cryptocurrencies. When it comes to purchasing and trading cryptocurrencies, go with a mainstream, high-volume cryptocurrency exchange such as Coinbase or Gemini, which proactively conforms with growing federal and state regulations.