The Russian invasion of Ukraine on Wednesday night will likely bring even more volatility to the crypto market, experts say.
The global financial implications are just one of the many costs of war. Experts also fear a significant human cost, with Ukrainian President Volodymyr Zelensky announcing more than 100 Ukrainians were killed after the first day after the invasion. The invasion has also disrupted the lives of Ukrainian citizens, many of whom have tried to flee the country as Zelensky urges others to prepare to defend their homes against Russian soldiers and attacks.
As the war continues, volatility in global financial markets, including cryptocurrency, is sure to follow, experts say.
“Regardless of the asset class, war creates a lot of volatility,” says Doug Boneparth, certified financial planner and founder of Bone Fide Wealth. “It will make it much more difficult for investors to stick to their strategies.”
Bitcoin dropped below $35,000 and Ethereum fell below $2,400 immediately after the invasion began, although both have increased since then. Bitcoin has lost almost half of its value since its November high of $68,990 thanks to recent geopolitical tensions in Europe, looming inflation and the prospect of interest rate hikes by the US Federal Reserve, among other factors. Ethereum price drop it is its lowest point since late January, and global stock markets are also sinking.
No signs of slowing down to what President Biden said this week described as an act of war by Russian President Vladimir Putin, experts say crypto investors should expect more volatility in the future.
But as with the usual crypto volatility, experts say investors should stay the course with a long-term strategy. Here’s what crypto experts are saying about this week’s crypto market volatility, fueled by the Russian invasion of Ukraine.
How experts react to swinging cryptocurrency prices
Experts say Russia’s invasion of Ukraine has hit risky assets, while traditional havens like gold and the US dollar are trading higher. For crypto investors, here’s what they say is moving the market right now:
Crypto is trailing the stock market
Bitcoin’s case as a “safe” asset like gold is weakening due to its volatility and higher correlation with stock markets, says Ben McMillan, chief investment officer at IDX Digital Assets. For Bitcoin to see a sustained rally above $45,000, there would need to be “a return of investor risk appetite across asset classes which, for the time being, looks set to be largely determined by the developments in the Ukraine,” McMillan. he says.
Although proponents have long defended crypto as an asset uncorrelated to traditional financial markets, Boneparth says the crypto market is reacting to news of Russia invading Ukraine in sync with stock markets.
“My first observation is something we’ve seen before, that cryptocurrencies, specifically Bitcoin and Ethereum, are risky assets,” says Boneparth. “They are going up and down just like stocks. You see stocks sell off overnight and all day today, and you see crypto doing the exact same thing.”
Boneparth says that time will tell if crypto investors were simply experiencing an initial knee-jerk reaction to the situation. [crypto] Is it removed from the correlation with equities or does it continue to follow the same pattern as equities? Let’s find out,” he says.
More mainstream crypto adoption
The widespread adoption of cryptocurrencies is what is causing the cryptocurrency market to move more and more in sync with capital markets, says Laura Shin, cryptocurrency podcast host and author of “The Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency”. Mania.” The determining factor in how the crypto markets evolve in the coming months is “whether crypto fans or more macro people drive the narrative, and whether crypto traders in leveraged positions are wiped out and drag the markets down with them.” “. ” she says.
Price drop in recent months
The reaction of the crypto market right now is “sort of normal” as it has been on the decline in recent months, according to Wendy O, a crypto investor and popular TikToker. She says we are seeing “more volatile bearish price action with global uncertainty” and unless we can break out of Bitcoin’s current downtrend, the market “will continue to see lower highs.”
What does this mean for investors?
Cryptocurrencies are highly volatile assets, a quality that is even more pronounced than usual due to Russia’s attack on Ukraine.
Experts say the best thing for investors to do right now is to stay calm and avoid knee-jerk reactions to changes in the market. Instead, stick to your long-term investment strategy. If you don’t have a long-term plan, Boneparth highly recommends making one now.
“Be very careful that you don’t make financial mistakes that you’ll regret later, because you panicked or couldn’t handle the volatility that’s going on,” says Boneparth. “Your ability to stay disciplined and stay committed is ultimately what will make or break you.”
While there are likely no immediate changes that crypto investors need to make, it is a good reminder that crypto assets are extremely volatile. This is why experts say that most investors should stick to the two big cryptocurrencies, Bitcoin and Etherealand they only invest what seems right to them to lose or no more than 5% of your total portfolio.
Always prioritize the important aspects of your finances, like saving for emergencies, paying off high-interest debt, and saving for retirement, over cryptocurrency investments. As for where you buy and trade cryptocurrenciesstick with a mainstream, high volume cryptocurrency exchangeI like base of coins or Geminithat proactively complies with evolving federal and state regulators.