© Reuters.
By Carlos González
Investing.com – In the early hours of Thursday, February 24, Russia began its invasion of Ukraine. A few hours later, at exactly 5 a.m., the and the rest of the cryptocurrencies felt the panic of war very strongly and their prices dropped significantly, with some cryptocurrencies falling by more than 15%.
Bitcoin bottomed out at 6:30 a.m. when it traded at $34,405, getting dangerously close to the $33,000 support level. At the same time, fell to $2,307 and fell to $0.75.
Bitcoin, Ethereum and Cardano are currently trading at $35,520, $2,390 and $0.77 respectively and dangerously threaten resistance.
“The invasion of Ukraine is a tragedy and threatens global stability,” said Jason Guthrie, WisdomTree’s digital assets manager for Europe. Therefore, the uncertainty it creates “will affect many asset classes, including cryptocurrencies.” It would be inappropriate to speculate how the situation might develop from now on. We hope for a quick resolution of the situation and a return to peace in the region.”
Is bitcoin losing its safe haven status?
As expected, all global markets and indices reacted with sharp declines at the start of the war between Russia and Ukraine. All ? No not all. Safe havens such as , government bonds (German or US 10-year bonds, for example) and energy commodities such as and futures have risen in value over the past few hours.
But what about bitcoin? Is it not currently considered by many experts as a safe haven and in direct competition with gold? Well… yes and no. All other things being equal, bitcoin had proven to be a reliable investment asset and a good asset to fight, among other things, against inflation, for example.
However, in the current conditions of great uncertainty, and still considering the main cryptocurrency as a risky asset with high volatility, it is difficult to imagine bitcoin acting as a real safe haven in the eyes of the international market. Maybe in the future, but not today.
“This conflict has shown that when things are really bad, the real refuge is gold and not the cryptocurrency sector,” says Víctor Alvargonzález, founding partner and chief strategy officer of Nextep Finance. In this sense, continues Alvargonzález, the cryptocurrency sector in general and bitcoin in particular, “has not proven its effectiveness as a safe-haven asset in the face of changes in central bank monetary policy” such as currency hikes. interest rate, “and it only remains to be seen whether it can act as such in the face of a loss of confidence on the part of central banks”.
Another idea is suggested by crypto-asset analyst at multi-asset investment platform eToro, Simon Peters: “As crypto-assets have become more attractive to institutional investors, they behave more like an asset” to risk.” Cryptocurrencies and US markets are moving together in a way that has never happened before. In my view, it looks like investors are positioning themselves for another drop in cryptoassets. now to safe havens like gold to overcome this short-term uncertainty”.
However, one positive thing to note about bitcoin is that it is “a growing positive technology, which has served many investors as a safe haven in the face of continued increases in inflation, a situation caused by injections from central banks,” says Diego Morin, sell operations analyst at IG.
Another positive view is that of Herminio Fernández, CEO of Eurocoinpay: “Bitcoin will undoubtedly eat away at the gold market as a long-term store of value. He adds: “The sector is legislated and regulated worldwide, including in Russia. Other countries hostile to cryptocurrencies are backtracking and already talking about regulating them, because they don’t want to miss the train of innovation and technology with the jobs that come with it.”
It should also not be forgotten that, as Daniel Santos, CEO of Woonkly points out, bitcoin “has not been historically correlated with the stock market and only started to have some correlation two years ago. , which we see when affected by events such as those that cause stock market declines.” We believe that at present they have not served as a refuge, as there has been a fall, not stability or a sell-off.”
“Bitcoin has already demonstrated its strength over the past few years,” Santos continues. Thus, “if we take as a reference the birth of bitcoin, it has been the asset that has given the highest returns year after year”, therefore, and in a scenario like today’s, “we can expect a lot of volatility and big declines in the price as it demonstrates that at the moment it is following the trends of other financial markets”, but the strength of bitcoin is intrinsic and going forward we are confident that we will see bitcoin well above current prices and strongly established as the safe haven for the crypto market, much like gold is for traditional markets.”
How low can bitcoin and other major cryptocurrencies go?
For Diego Morín, sell trades analyst at IG, “we should see crypto approaching key levels, such as bitcoin’s yearly lows ($33,076), an area that, if lost, would give a downward momentum towards the critical $30,000 level, a floor created between May and July last year.The same would apply to Ethereum, with support seen at $2,160 ( yearly lows), so if supply continues with the current strength in the face of this conflict, we could see a test of the support at $1,800, the 2021 lows.”
Simon Peters, expert cryptocurrency analyst at multi-asset investment platform eToro, clarifies that “While we continue to see a drop in price, the first thing to keep in mind is that, even with all of this, we are yet to reach the lows seen in the middle of last year after the bitcoin mining crackdown in China, when we saw the price drop to a low of $29,000-30,000 “. This would be the first area to watch and see if any major buyers come into the picture.”
In contrast, Herminio Fernandez, CEO of Eurocoinpay, sees bitcoin at $25,000: “It’s almost inevitable.” “Even more,” Hernandez continues, “if the war in Ukraine escalates and drags on, dragging the rest of the cryptocurrencies down with it.” Additionally, bitcoin, as the dominant currency, fails to overcome gold’s dominance in major markets as a valuable asset, which weighs on its price.”
After that ?
Without a doubt, and despite this cryptocurrency crisis, bitcoin and the rest of the cryptocurrencies still have a long way to go, as Miguel Hernández, training director of Traders Business School, reminds us: “Like the crisis of 2017 with the Chinese ban, the 2020 one with the global pandemic, and the 2021 one with the mining ban in China for cryptocurrencies,” this crisis “affected cryptocurrencies, like other assets.”
However, continues Mr. Hernández, “that does not mean that it is the end for them, quite the contrary. It is a relatively new world which emerges to remain. To this warlike conflict, we must add the restrictions that they suffer from a tax point of view to try to control it, and this goes against the principle of cryptocurrencies, which is decentralization.This will not be the first or the last crisis that cryptocurrencies, like any other financial asset, will be exposed”.
Daniel Santos, CEO of Woonkly, agrees: “Cryptocurrency adoption is just beginning and we expect exponential growth in usage, investment and the emergence of thousands of new blockchain products that will drive , in turn, greater adoption”.
Furthermore, Santos continues, “even if the current circumstances are not the most appropriate, the blockchain technology that underpins cryptocurrencies is a reality, and it is here to stay, it can go through many phases, both bullish and bearish, they may have downsides along the way, but they won’t be able to stop all the movement that’s been generated around it or the massive adoption that’s already taking place.”