The Ukraine War: How Russia’s Aggression Affected Bitcoin & Crypto and What Might Happen Next

Kyiv. Source: Twitter/@IAPonomarenko
  • The see-sawing stagnation of the crypto market at the moment is the result of several factors, and not just the Ukraine war.
  • “The political instability will once again highlight bitcoin’s main goal of being a transparent, open-source, peer-to-peer network not controlled by a single administrator or central bank.”
  • The continuation of the war could serve as a catalyst for bitcoin’s transition from a risk-on to a risk-off asset.

More than three weeks in and the Ukraine-Russia war is still raging, despite negotiations over a possible peace settlement. While the human costs of the war are something that can never be repaid, the war has also had a noticeable impact on the global economy and financial markets, including the crypto market.

Back in January, analysts predicted that direct armed conflict between Russia and Ukraine could result in significant losses for bitcoin (BTC) and other cryptoassets. This has been borne out to some extent by the ensuing war, with the price of bitcoin initially responding to Russia’s invasion on Thursday February 24 with a 7% drop from about USD 37,500 to USD 34,740.

However, bitcoin has since recovered to a price of around USD 40,600 (as of writing), with industry figures telling that the war has, to some extent, strengthened the idea of the cryptocurrency as an alternative to fiat currencies, as well as stocks. But, while some say that the ongoing war could enhance the relative value of bitcoin, its longer term effects on the global economy may continue to drag down the crypto market for some time.

War, inflation, and interest rates

Analysts tend to affirm that the see-sawing stagnation of the crypto market at the moment is the result of several factors, and not just the Ukraine war.

“Investors will generally rotate out of perceived riskier assets when uncertainty arises. That’s why we’ve seen cryptoassets come under pressure on occasions during this war when tensions have escalated,” said eToro senior analyst Simon Peters.

Despite acknowledging the impact of the war on the crypto market, Peters suggests that it’s the pre-existing state of the global economy that’s mostly responsible for dragging it down. He also notes that, historically, crypto has witnessed a bear market of some kind roughly every four years or so, with the last being in 2018.