Mumbai: Cryptocurrencies crashed as the threat of Russia invading Ukraine escalated amid border skirmishes, resulting in the crypto investor community offloading their risky digital assets to protect portfolios against further price drops.
On Friday, US President Joe Biden said that Russian President Vladimir Putin had decided to invade Ukraine, and that a military strike could happen in days.
On Saturday and Sunday, there were reports of shelling and multiple explosions in Donetsk, eastern Ukraine, further driving fear into the crypto markets.
Bitcoin was trading on Coinbase at $38,265 at 5 p.m. India time, down 4% in the previous 24 hours and 9.6% lower over the previous seven days.
Other alt coins also bled as investor sentiment worsened due to war clouds hanging over Europe–Ethereum was down 3.6%, Binance Coin fell 4.2%, Avalanche dropped 4.25%, Terra fell 3.31% and Cardano was down 3.85%. The metaverse tokens, Decentraland and The Sand Box, fell 5.7% and 5.3%, respectively.
Meme coin Shiba Inu fell over 7%, and DogeCoin slid by 2.3%.
According to Coinbase, the market dropped 4.18% over the previous 24 hours.
The Ukraine-Russia crisis has halted the rally that the crypto market had been recording in the past few weeks.
Bitcoin had made a smart recovery in the past few weeks, touching $45,855 on February 10 after a low of $32,327 on January 24. Ethereum went up to $3,284 on February 10 from a low of $2159 on January 24.
The latest dip caps a week of rocky price action for the crypto market, with bulls and bears testing each other most of the week.
“The current dip in the crypto market can be seen as a knee-jerk reaction to the growing tension between Ukraine and Russia,” said BuyUcoin CEO Shivam Thakral. “If there was a war between the two biggest crypto hubs in the world, it could shoot up the Bitcoin hash rate, and this fear is keeping the crypto market on its toes. If we look at the overall picture, we have seen some promising developments recently, like the crypto-focused Super Bowl and NYSE filing a trademark to become a financial exchange for NFT (non-fungible token) and crypto trading.”
Meanwhile, Indian investors have been a worried lot due to sharp price corrections in the last two months. The losses, coupled with regulatory ambiguity over the legal status of crypto and a high tax rate on crypto gains announced by the government during the budget, have added to the woes of small investors.
“In the last two months, they have been in the red,” said Vishal Gupta, a Noida-based crypto investor and commentator. “It has been one factor after another that’s hit the cryptocurrency market. People are not used to dealing with a prolonged period of uncertainty. Most small investors are now saying that once they recoup their investments, they are getting out of the market, but then crypto is addictive.”
The Russia-Ukraine conflict has also hit the traditional financial markets.
On Friday, the Dow fell 232 points (0.7%) while the Nasdaq was down 168 points (1.23%).
Several macroeconomic events have been impacting the crypto market over the last two months: First, the Omicron scare led to a crash, then the US Federal Reserve’s announcement of balance sheet tightening spooked the market. It was followed by a sharp correction in technology stocks, which ended up impacting crypto prices. Also, President Biden is expected to issue an executive order on regulation of cryptocurrencies, adding to the uncertainty.
Now that Bitcoin has broken the psychologically important barrier of $40,000, further losses could be expected, experts said.
Bitcoin was trading at $57,489 on February 20, 2021, and a year later it is down 31.45%, while Ethereum is up 37.7%.
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