Published: March 2nd, 2022
A resurgent cryptocurrency market is looking like more than a blip this week (week commencing 28 February), as the prices of Bitcoin, Ethereum, and other leading coins continue to rise.
At time of writing, Bitcoin had shot past USD 43,000 while Ethereum was on the cusp of USD 3,000. That puts BTC up nearly 15 per cent from the previous week, according to CoinMarketCap. Bitcoin finished last week’s (week commencing 21st February) session at around USD 37,800, rising from lows of USD 34,000 when the week began.
Ethereum, meanwhile, moved back above USD 2,900 for the first time in a fortnight, with the price of ETH at time of writing reaching above USD 2,935.
Crypto’s number two coin is now flirting with the psychologically important level of USD 3,000, which it last reached on 18th February. It’s rising in line with the broader cryptocurrency market cap, which has grown by close to 10 per cent since Monday 28th February, and now sits above USD 1.9 trillion.
Bitcoin and other digital currencies were hit by a sudden sharp decline last week when Russia ratcheted up geopolitical tensions with its long-anticipated invasion of Ukraine. As NATO and other Western nations hit Russia with coordinated economic sanctions, crypto markets have been buoyed by the turmoil.
As sanctions disrupt Russia’s banking and payments systems and hammer valuations of the ruble, the case for decentralized currencies that operate beyond the effective control of governments may be getting a boost.
Terra (LUNA) looks to be the biggest winner so far, rising an eye-opening 25 per cent this week to reach a price above USD 94 at time of writing. Solana (SOL) has also jumped by 18 per cent over the last few days to reach USD 104.
Bitcoin’s price initially sank when Russian President Vladimir Putin announced a "special military operation" in Ukraine on Thursday, 24th February. Since then, news cycles have been dominated by updates about Russian territorial advances and stiff Ukrainian resistance.
While citizens on both sides can be forgiven having bigger concerns than the price of Bitcoin, markets can provide a window into broad based economic anxieties. That’s especially true given Russia's central role in the global energy sector.
Numbers from CoinMarketCap last week had the total cryptocurrency market cap down by about five per cent in the 24 hours following Putin’s televised announcement of the conflict, pulling it below USD 1.6 trillion. Many of the losses happened in the immediate run-up and aftermath of the news, when the price of BTC plummeted from USD 37,000 to under USD 35,400.
Of course, crypto markets weren't the only ones feeling pain. American stock markets moved further into correction territory in the following 48 hours, with the Dow Jones Industrial Average falling 1.37 per cent. Asian markets reacted with a one per cent drop in the Nikkei, while China's Hang Seng Index traded two per cent lower.
Economist and former Obama-era presidential advisor Jason Furman told Reuters that Russia is ‘incredibly significant in the global economy when it comes to oil and gas. Despite having a GDP similar to Spain or the US state of Florida, in energy terms ‘it’s basically a massive petrol station.’
In the post-COVID period when supply chains are stretched and inflation on the rise, adding an energy shortage to the mix will inevitably roil markets on worries that consumer and business spending will dip. Although BTC is often used as a hedge against economic and currency uncertainty, its rapid adoption by traditional finance in 2021 means its price movements have become strongly correlated to stock market moves.
This Monday, 28th February, Bitcoin rose above USD 40,000 for the first time since February 20.
The number one cryptocurrency's price of roughly USD 40,500 at time of writing represents a (close to) seven per cent rise from the previous week, a seven-day timeframe marked by war-driven market instability.
Crypto markets weren't the only ones to take a hit. US equity markets dipped well into correction territory, with the S&P 500 and Dow Jones Industrial Average both falling by between one and four per cent.
Now, as condemnation of Russia’s military invasion s intensifies, and sanctions against the country and its rulers begin to take hold, markets appear to be pricing in new risk expectations.
Some 36 hours after the Ukrainian invasion got underway, BTC bounced back to a price over USD 38,000. At time of writing, numbers from blockchain analytics form Kaiko suggest Bitcoin trades against the Russian ruble have reached a nine-month high.
Wider crypto markets also rebounded, with the total cryptocurrency market cap reaching USD 1.7 trillion on the same day. At time of writing, total crypto market cap has moved up to USD 1.9 trillion.
Other leading coins like as Solana and Terra have also seen notable bounce-backs. Terra’s price has risen by 25 per cent while Solana has also jumped by 18 per cent.
Ethereum, the number two coin by market cap, has been slower to recover but is still on the up. It could reach USD 3,000 before the week’s session ends.
Ruble-Bitcoin (RUB/BTC) trading volume has also surged to nine-month highs as the Russian fiat suffers against the greenback and feels the impact of Western sanctions.
Blockchain analytics from Kaiko had ruble-denominated Bitcoin trades up by as much USD 1.5 billion on Thursday 24th February, the day Russia’s invasion began.
The majority of trades were happening on Binance, Kaiko analysts said. Their analysis also points to a rise in Tether-Ruble trading volume, which reached a seven-month high of 1.4 billion the same day.
The Ruble plummeted by 30 per cent against the greenback on Monday 28th February, before staging a partial comeback as the Russian central bank raised its key interest rate.