Tuesday saw the value of Bitcoin soaring 13% despite the market uncertainty regarding Russia’s invasion of Ukraine. It lent further credence to the theory that Bitcoin is a safe asset that can survive otherwise difficult market conditions.
Bitcoin continued its impressive rebound following a difficult few months to hit a value of over $44,165 on Tuesday. The moves are all the more surprising considering that cryptocurrencies across the board were hard-hit as investors moved to shed high-risk assets ahead of the conflict in eastern Europe.
It wasn’t just Bitcoin that enjoyed a strong day on the markets. Ethereum also enjoyed a surge in value of over 10% after the US Treasury Department implemented a range of sanctions against the central bank of Russia. These sanctions included a range of measures that would effectively stop US citizens from using Russia’s central bank and that Russian assets would be frozen in the US.
What’s interesting is the fact that crypto exchanges have seen high volumes of Bitcoin trading in Russian and Ukrainian currencies. This shows that the crisis is causing an increased demand for cryptocurrencies that benefit from border-less transactions. There have also been notable cryptocurrency donations to the Ukrainian army that reached a figure of over $16 million by the end of the weekend.
Plus Bitcoin has proven to be an effective way for Russian investors to get their wealth out of the country. It comes at a time where a wave of sanctions has caused the Russian rouble to sink by a third in value to a new record low. Interestingly, Binance – the world’s largest cryptocurrency exchange – said that it would not be blocking Russian users from using its trading accounts. This is despite Ukraine’s vice prime minister calling for crypto exchanges not to let Russians use their trading platforms.
What next for Bitcoin?
The conflict in Ukraine is also adding doubt as to where the Federal Reserve will continue its plans to impose the first of many interest rate hikes in March. Previously, there were plans to raise interest rates to try and contain the overheating US economy. But with the conflict causing deep market uncertainty, the Fed might hold off from the interest rate hike. This could have the effect of causing the riskier assets like Bitcoin to soar in demand.
The next few days will be telling as to whether Bitcoin will prove to be ‘digital gold’ or whether it will remain tied to prevailing market trends. Many crypto advocates have suggested that cryptocurrencies could decouple themselves from global markets to become a safe store of value.
Such a theory has been under fire in the past few months as the value of Bitcoin has plunged in a way that mirrored that of riskier tech stocks. But with cryptos such as Bitcoin experiencing a new wave of demand, it looks like cryptocurrencies may offer a way out for investors to navigate the turbulent market conditions.