Bitcoin outperforms gold and stocks


Cryptocurrencies have continued to pull away from equities as the escalating war in Ukraine prompts investors to seek safe havens.

Bitcoin advanced as much as 2% in early trading in Hong Kong before giving up some gains. It has jumped 17% in the past three days – a period during which President Vladimir Putin has stepped up bombings of Ukrainian cities and other countries have responded with additional sanctions against Russia.

The MSCI AC World Index has fallen for nine of the past 10 days, including the last three.

“This geopolitical environment is certainly a tailwind for crypto,” Jonathan Cheesman, head of OTC and institutional sales at crypto derivatives exchange FTX, said in a note Tuesday. “This situation highlights the use case for a decentralized, neutral, algorithmic safe haven.”

The Bloomberg Galaxy Crypto Index rose 4.5% on Tuesday, the fifth straight day of gains. Ether was up 0.8% at 3:30 p.m. in Hong Kong on Wednesday.

Bitcoin proponents have for years touted its virtues as a hedge against conflict and inflation, citing its borderless nature and fixed supply. That picture was tarnished by a crypto rout that began in November and sent Bitcoin down as much as 52% amid concerns over central bank tightening. Other so-called alt-coins suffered even steeper declines.

But the last few days of large gains in digital tokens have sparked the idea that they at least offer protection against governments that can seize other types of assets, as some have recently promised to do to Russian oligarchs.

It is “fascinating that after a week of geopolitical uncertainty, Bitcoin is outperforming gold, which is known as a safe-haven asset,” said Marcus Sotiriou, analyst at GlobalBlock, a UK-based digital asset broker. Gold slid 0.2% on Wednesday after rallying since late January.

Bitcoin extended a two-day rally, leading to broad-based gains in cryptocurrencies as digital assets reasserted themselves as safe-haven assets – and emerged as a potential way to circumvent sanctions – amid the crisis. escalation of the war between Russia and Ukraine.

The largest digital coin by market value rose 8% on Tuesday to $44,964 during New York trading hours, its rally over the past two sessions adding 20% ​​to its market value at one point and its capitalization total stock market exceeding $840 billion once. again.

Other cryptocurrencies also advanced, with Ether surging above $3,000. It also broke above its average price over the past 50 days, which is generally seen as a bullish development.

Analysts monitoring the market say the stunning breakthrough can be attributed to the idea that cryptocurrencies could serve as a safe haven as the war in Ukraine escalates. Its appeal lies in the fact, the argument goes, that cryptocurrencies are detached from government control and therefore not accountable for any of their actions.

Bitcoin “has similar properties to gold in that if you hold it, you directly control the assets, unlike governments and banks that sit in between,” said FRNT CEO Stéphane Ouellette. Financial Inc.

“In a time when the banking sector is destabilized in a region, which is obviously happening in Europe right now, it would make sense to see flows into BTC as people diversify away from the banking system,” he said. he declared, adding that speculators can enter. in the face of such trends, which can push prices up.

A fresh wave of turmoil hit global markets on Tuesday as the war in Ukraine escalated amid mounting sanctions on Russia.

Russian troops continued to bomb military and civilian installations, Bloomberg News reported, as Ukrainian President Volodymyr Zelenskiy accused Russian forces of committing acts of terror and the Kremlin stepped up its offensive despite a barrage of directed sanctions against Moscow.

The rally is about “the usefulness of these assets to serve as a potential workaround for Russian sanctions and also a point of proof that virtual currencies are viable alternatives to fiat currencies like the Russian rouble,” said Nicholas Colas, co -founder of DataTrek Research. .

Stocks in Europe fell along with US stocks, with the S&P 500 falling for the second day in a row. Wall Street’s fear gauge, the VIX, also rose.

Many analysts have long postulated that Bitcoin can be a useful asset during geopolitical unrest. Its outperformance amid volatility has some bulls indicating a break from the narrative that crypto is just another risky asset.

Adam Farthing, Japan risk director at crypto trading firm B2C2, said Bitcoin could “decouple from risk” and start trading more as a hedge against geopolitical instability and inflation.

“Bitcoin saw a significant upside move today as it appears to have slightly regained its safe-haven status as the Russian-Ukrainian conflict continues to escalate,” said XTB Market analyst Walid Koudmani.

Other influences can also come into play.

“We’ve never seen a group of nations confiscate real estate from Russian tycoons, taking a country’s money,” said Mike Novogratz, CEO and founder of crypto platform Galaxy Digital. “That’s why Bitcoin was created, because people don’t trust governments. That’s a big deal – in many ways, it’s starting the acceleration of the de-dollarization of the world.

Bitcoin trading volumes using the ruble hit their highest level since May, suggesting that Russians are potentially shifting their money into crypto as the ruble plunges to an all-time low. Meanwhile, global trading volumes for Bitcoin and Ether, the second-largest cryptocurrencies by market value, have fallen even as their prices have risen over the past month, according to a report from CryptoCompare. The average daily volume of global transactions in crypto products was around $353 million, down more than 24% from January.

Because Bitcoin’s fundamental and intrinsic value can be elusive, “technicals, a map of market psychology, can be critical,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. He notes that some technicians are indicating that a break above the February highs is potentially key and possibly signals a move above $50,000.

Although still high at 0.55, Bitcoin’s correlation with the S&P 500 has dissipated after surpassing 0.7 earlier this year, according to data compiled by Bloomberg. A correlation of 1 means that two assets move perfectly in tandem, while a zero correlation indicates that their movements are totally independent.

“It looks like the link to risk assets has been temporarily severed,” said Craig Erlam, senior market analyst at Oanda. Still, he says any evidence of crypto being used as a means to circumvent sanctions could prompt policymakers to crack down with more regulations.

Amid the price surge, Bitcoin’s 90-day volatility also trended high, according to data from Bloomberg.

Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors, urges caution, saying its volatility is why he is wary.

“He’s going to behave in a somewhat radical way,” he said in an interview. “Let’s remember he hasn’t been around that long, and we see him as a teenager in a world full of mature assets. And so teenagers are going to behave erratically from time to time and you can’t really understand their behavior, and it really is one of those days.

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