On Friday, US President Joe Biden said that Russian President Vladimir Putin had decided to invade Ukraine and a military strike could happen within days.
On Saturday and Sunday, there were reports of bombings and multiple explosions in Donetsk in eastern Ukraine, creating more fear in the crypto markets.
Bitcoin was trading on Coinbase at $38,265 at 5pm India time, down 4% in the previous 24 hours and down 9.6% in the previous seven days.
Other altcoins also tumbled as investor sentiment worsened due to clouds of war hanging over Europe: Ethereum down 3.6%, Binance Coin down 4.2%, Avalanche down 4.25 %, Terra was down 3.31%, and Cardano was down 3.85%. Metaverse tokens Decentraland and The Sand Box fell 5.7% and 5.3%, respectively.
The Shiba Inu meme coin fell more than 7% and DogeCoin slid 2.3%.
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According to Coinbase, the market fell 4.18% over the previous 24 hours.
The crisis between Ukraine and Russia has slowed down the upturn that the crypto market had been registering in recent weeks.
Bitcoin has rallied smartly in recent weeks, hitting $45,855 on Feb. 10 after hitting a low of $32,327 on Jan. 24. Ethereum rose to $3,284 on Feb 10 from a low of $2,159 on Jan 24.
The latest drop caps off a week of rocky price action for the crypto market, with bulls and bears testing each other for most of the week.
“The current slump in the cryptocurrency market can be seen as a knee jerk reaction to the growing tension between Ukraine and Russia,” said BuyUcoin CEO Shivam Thakral. “If there were to be a war between the two largest crypto centers in the world, the hash rate of Bitcoin could skyrocket, and this fear keeps the crypto market on its toes. If we look at the big picture, we have recently seen some promising developments such as the crypto-focused Super Bowl and the filing of a trademark on the NYSE to become a financial exchange for NFT (non-fungible token) and cryptocurrency trading.” .
Meanwhile, Indian investors have been very concerned due to the sharp price corrections in the last two months. The losses, coupled with regulatory ambiguity over the legal status of cryptocurrencies and a high tax rate on cryptocurrency profits announced by the government during the budget, have added to the woes of small investors.
“In the last two months, they have been in the red,” said Vishal Gupta, a Noida-based crypto investor and commentator. “It has been one factor after another that has hit the cryptocurrency market. People are not used to dealing with a prolonged period of uncertainty. Most small investors now say that once they get their investments back they are out of the market, but then cryptocurrencies are addictive.”
The Russia-Ukraine conflict has also affected traditional financial markets.
On Friday, the Dow Jones fell 232 points (0.7%) while the Nasdaq fell 168 points (1.23%).
Several macroeconomic events have had an impact on the crypto market in the last two months: first, the Omicron scare led to a drop, then the US Federal Reserve’s announcement on balance sheet tightening spooked the market. A sharp correction in tech stocks followed, which ended up weighing on cryptocurrency prices. Additionally, President Biden is expected to issue an executive order on crypto regulation, adding to the uncertainty.
Now that Bitcoin has broken through the psychologically important $40,000 barrier, more losses can be expected, experts said.
Bitcoin was trading at $57,489 on February 20, 2021, and a year later it is down 31.45%, while Ethereum is up 37.7%.