Market deep dive: Crypto markets nosedive as Russian invasion escalates

Overall, markets are apprehensive now that Russian troops and tanks have pushed into the Ukraine. Airstrikes hit the country’s capital as well as other cities. The Russian president, Vladimir Putin, ordered a military operation to “demilitarise and de-Nazify the Ukraine”, and to bring its leaders to trial. The political opposition, NATO, describes the Russian assault as “a brutal act of war”, and has stated that the military alliance has activated defense plans in response. US President Joe Biden calls this move an unprovoked and unjustified attack on the Ukraine, pledging further action against Russia. It is clearly a difficult global situation; it is hard to judge, and difficult to foresee the consequences that this will have in the near future.

Traditional markets reacted to the invasion. In general, stocks fell (MOEX Russia Index -35%), while Brent crude oil topped $100 (trading at $96) a barrel for the first time in a few years. In addition to this, credit default swaps have skyrocketed. Looking at recent history, the US involvement in Iraq (in both 1990 and 2003) initially led to a fall in stocks by more than 10%.

$BTC lost 8.5% and $ETH initially lost 10%, but managed to recover now heading towards the weekend. The crypto market has also been hit badly since the beginning of the year. However, the falling prices are not necessarily inconvenient for some smart investors and crypto believers. Interestingly enough, the crypto markets have increasingly demonstrated the same mechanism as other traditional markets. Until now, the overall crypto market has been rated more or less as a niche market, maybe controlled by a group of participants quite disconnected from traditional markets. Today, crypto is increasingly developing to become part of the mainstream financial market. The overall correlation is currently trading at a rather high level. The stories of investors who used the new instruments at an early stage in the past and performed extremely well, along with the development of crypto assets within the broader market take away the exclusivity and speculation of the asset class. Vitalik Buterin (co-founder of Ethereum) even welcomes the overall currently difficult crypto market, and describes the situation as another “crypto winter”. He considers the current market consolidation as beneficial since it means that many projects will disappear and that only the sustainable will survive in the long run. It is extremely important to understand how a project works, to look at who is behind it, and how people are actually involved! The real and hard-core crypto community is happy about the bear market, seeing the digital market as benefiting from the loss of short-term speculation.

In other news: another impressive investment in the crypto space was announced recently. Singapore firm Amber Group has raised $200m in a fundraising led by Singapore state-owned investment firm Temasek, boosting the valuation of the cryptocurrency financial services firm to $3bn. Amber was valued at $1m seven months ago.

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