Bitcoin (BTC-USD) rocketed by over 5% on Tuesday, even as risk aversion drove down blue-chip and technology shares that cryptocurrencies have been linked to for weeks, as markets digested new developments in Russia’s ongoing invasion of Ukraine.
Data released this week from Kaiko shows that volume for trading Bitcoin and stablecoins like Tether (USDT-USD) jumped in the last several days within Ukrainian and Russian markets, as the Ruble tumbled in global markets to mere pennies on the U.S. dollar.
In recent sessions, digital tokens have behaved more like risk-sensitive assets instead of the alternative asset class they’re supposed to be – including Bitcoin, which some market players view as a safe-haven.
However, the move to sanction Moscow – including shutting Russia out of the SWIFT global financial system – appears to have triggered a sentiment shift in favor of crypto. Among some crypto investors, a theme has emerged arguing a government-led financial crackdown is boosting the advantages of the more decentralized digital token sector.
“The Ukraine-Russia situation has caused significant financial upheaval and individuals, businesses and indeed government agencies – not just in the region but globally - are looking for alternatives to traditional systems,” said deVere Group’s Nigel Green, citing mounting financial chaos within Russia that’s affecting everyday citizens.
“As banks close, ATMs run out of money, threats of personal savings being taken to pay for war, and the major international payments system SWIFT is weaponized, amongst other factors, the case for a viable, decentralized, borderless, tamper-proof, un-confiscatable monetary system has been laid bare,” Green wrote.
“And as alternatives, such as crypto, prove to be credible and workable, the dollar’s reserve status could, ultimately, be in jeopardy,” he added.
“There are a lot of use cases for crypto right now, which is a relatively fast and efficient way to move money across borders,” CoinDesk Global Macro Editor & CoinDesk TV Anchor Emily Parker told Yahoo Finance Live on Tuesday.
On Monday, buyer demand for Bitcoin sent its price skyrocketing by 17% within a 24 hour period. Meanwhile the Standard and Poor’s Index finished slightly down (-0.25%) and the Nasdaq closed slightly higher (+0.44%). That was a complete reversal from last week, when BTC’s 60-day correlation to the S&P 500 reached a new all-time high – meaning it had never been as tightly linked to stocks.
When that happened, Noelle Acheson, head of market insights with Genesis Trading told Yahoo Finance last Wednesday that broad uncertainty around monetary and geopolitical policy stresses appeared to be causing a sell off from investors across all risk-off assets.
According to CoinMetrics data, BTC’s 60-day correlation to the S&P 500 is heading south – and analysts like Acheson are paying full attention.
Though it's still too soon to call the trend, Acheson and others are looking to see if this breakout is signaling a deeper directional change or “decoupling” from equity investments. If that's the case, Bitcoin’s current dynamics might signal a major shift in how investors value the asset.
According to Acheson, part of Bitcoin’s performance yesterday could be attributed to a derivatives-led “short squeeze” in addition to other momentum trading factors. However, some indicators suggest something deeper could be happening.
On-chain metrics from data provider Glassnode suggests the bulk of Bitcoin buying over the last few days has come from smaller retail investors, or buyers who own less than 1 unit of Bitcoin. Given Bitcoin’s high adoption by larger investors, this is the first demand rally from retail buyers the asset has seen this year.
For more information about cryptocurrency, check out:
Dogecoin, what is it? How to buy it
Ethereum: What is it and how do you invest in it?
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