By Carlos Gonzalez
Investing.com – In the early hours of Thursday, February 24, Russia began its invasion of Ukraine. Hours later, at exactly 5 in the morning, and the rest of the cryptocurrencies strongly felt the panic of the war and their price dropped significantly with drops that, in some cryptocurrencies, far exceed 15%.
In this sense, Bitcoin showed its lowest point at 6:30 a.m. in the morning when it was trading at $34,405, dangerously approaching the support of $33,000. At the same time, it fell to $2,307 and to $0.75.
Bitcoin, Ethereum and Cardano are currently trading at $35,520, $2,390 and $0.77 respectively and are dangerously threatening their resistance.
For Jason Guthrie, Head of Digital Assets at WisdomTree Europe“the invasion of Ukraine is a tragedy and threatens global stability”. Therefore, the uncertainty it generates “will affect many asset classes, including cryptocurrencies. It would not be appropriate to speculate on how the situation may evolve from now on. We look forward to a speedy resolution of the situation and a return to peace in the region.”
Does Bitcoin lose the consideration of refuge value?
As expected, all world markets and indices have reacted with sharp falls at the start of the war between Russia and Ukraine. Everyone? Not all of them. Safe-haven securities such as , public debt (German or US 10-year bonds, for example) and energy commodities such as and have increased in value in recent hours.
But what about Bitcoin? Wasn’t it currently considered by many experts to be a benchmark safe-haven value that directly competed with gold? Well… Yes and no. Other things being equal, Bitcoin had shown some reliability as a good investment asset and a good value to combat, among other things, inflation, for example.
However, in the current conditions of great uncertainty, and still considering the main cryptocurrency as a risk value with high volatility, it is difficult to imagine Bitcoin acting as a true refuge value in the eyes of the international market under these conditions. Maybe in the future, but not today.
“With this conflict it has been shown that when things really get bad, the true refuge value is gold and not the crypto sector,” he points out. Víctor Alvargonzález, founding partner and director of strategy at Nextep Finance. In this sense, Alvargonzález continues, the crypto sector in general and Bitcoin in particular, “has not proven to be effective as a refuge value in the face of changes in the monetary policy of central banks” such as increases in interest rates, “and only it remains to be seen whether it can act as such in the face of a loss of confidence by central banks”.
Another idea is that indicated by the expert analyst in crypto assets of the multi-asset investment platform eToro, Simon Peters: “As crypto assets have become more attractive among institutional investors they are behaving more like a “risk” asset. Crypto assets and US markets are moving together like never before. In my opinion, it seems that investors are positioning themselves for a further drop in crypto assets. Investors are now turning to safe havens like gold to overcome this short-term uncertainty.”
However, something positive to highlight about Bitcoin is that it is “a positive technology that is growing, and that has served many investors as a refuge from the continued increases in inflation, a situation caused by the injections of central banks,” he comments. Diego Morín, Sales Operations Analyst at IG.
Another positive opinion is offered by Herminio Fernandez, CEO of Eurocoinpay: “Without a doubt, in the long term, Bitcoin will eat gold as a store of value.” And he adds: “The sector is being legislated and regulated throughout the world, including Russia. Other countries that are not very friendly with cryptocurrencies are backing down and are already talking about regulating them, since they do not want to miss the train of innovation and technology with the consequent jobs that this implies”.
Thus, we must not forget that, as indicated Daniel Santos, CEO of Woonkly, Bitcoin “has not been correlated, historically, with the stock market and only two years ago it began to have a certain correlation, which we are seeing when events such as those that lead to stock market crashes affect it. We believe that right now they have not served as a refuge value, because there has been a fall, not stability or sale.
“Bitcoin has already shown its strength over the last few years,” continues Santos. Thus, “if we take the birth of Bitcoin as a reference, it has been the asset that has given the highest returns year after year”, therefore, and in a scenario like the current one, “if we can expect a lot of volatility and sharp price drops, since it is showing that at the moment it follows the trends of other financial markets a bit, behaving in a similar way, but the strength of Bitcoin is intrinsic and, looking to the future, we are sure that we will see Bitcoin well above prices current and strongly established as the refuge value of the crypto market, in the same way that gold does with traditional markets”.
How far can Bitcoin and the rest of the major cryptocurrencies fall?
For Diego Morín, Sales Operations Analyst at IG, “we would have to see the approach of cryptos to key levels, such as the annual lows in Bitcoin ($33,076), an area that if lost would give downward momentum to the critical level of $30,000, a floor created between May and July last year. We would have the same situation for Ethereum, with the sighting of the support of 2,160 dollars (annual minimum), therefore, if the offer continued with the current strength in the face of this conflict, we could have a test of the support of 1,800 dollars, minimum of the year 2021”.
For its part, Simon Peters, expert crypto asset analyst at the multi-asset investment platform eToro clarifies that “if we continue to see a drop in price, the first thing to keep in mind is that, even with all this, we have not yet reached the lows seen in the middle of last year after the crackdown on Bitcoin mining in China, at which point we saw the price drop to as low as $29,000-$30,000. This would be the first area to look at and see if any significant buyers step in.”
On the other hand, Herminio Fernandez, CEO of Eurocoinpay, sees Bitcoin at $25,000: “It’s almost inevitable.” “Even more” continues Hernández “if the war in Ukraine intensifies and continues over time, dragging down the rest of the cryptocurrencies. In addition, Bitcoin as the dominant currency cannot overcome the dominance that gold has in the main markets as an asset of value this is weighing down its price”.
And now that?
Without a doubt, and despite this crisis in crypto assets, Bitcoin and the rest of the cryptocurrencies have a long way to go, as you recall. Miguel Hernández, Training Director of Traders Business School: “As with the 2017 crisis with the Chinese ban, in 2020 with the global pandemic, and in 2021 with the Chinese mining ban for crypto assets,” this crisis “has affected cryptocurrencies, as well as other assets”.
However, Hernández continues, “this does not mean that it is the end of them, quite the opposite. It is a relatively new world and one that is emerging to stay. To this warlike conflict, we must add the restrictions that they are suffering from the fiscal 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 nor the last crisis to which both cryptocurrencies and any financial asset will be exposed.”
In the same line stands Daniel Santos, CEO of Woonkly: “The adoption of cryptocurrencies has only just begun and exponential growth is expected in use, investment and the appearance of thousands of new blockchain products that, in turn, lead to greater adoption.”
In addition, Santos continues, “as much as the current circumstances are not the most appropriate, the blockchain technology that supports cryptocurrencies is a reality, and it is here to stay, it may go through many phases, both bullish and bearish, they may have drawbacks for the way, but they will not be able to stop all the movement that has been generated around it or the massive adoption that is already taking place”.