Cryptocurrencies have always been extremely volatile, which is even more evident these days.
Recently, it was noticed that the main cryptocurrencies fell down, as a direct consequence of the conflict involving Russia and Ukraine.
Throughout this period, Russia, and Belarus on a minor scale, have been both affected by severe financial sanctions imposed by the global community, who’s massively against the war.
As a result of these sanctions, lots of local Russian banks have been directly affected, with some of them even removed from Swift. Global payment systems such as VISA also decided to halt their operations in Russia, in an attempt to endorse the financial boycott the country has been suffering.
Even though some crypto out there crashed as soon as the war broke out in Ukraine, this is still one of the few select areas that have not been directly affected by any sanctions.
It’s being reported all over the media that cryptocurrencies are being used as an escape valve for the average Russian who still would like to transact smoothly online.
Within the next few lines, we’ll break down key aspects of what could be in the foreseeable near future for the overall crypto market and its investors, as the dramatic conflict in Ukraine keeps going.
Impact of Sanctions on Cryptocurrency
As we mentioned briefly in the introduction to this article, the western-imposed sanctions did not directly affect cryptocurrencies initially.
However, the war break out had its impact on crypto, at least in the early days.
Early on in the Russia’s invasion, we saw one of the biggest cryptocurrencies – Ethereum – drop significantly. It has reached its lowest value in recent times, going from USD 3.1k to USD 2.4k for 1 Ether in a matter of one week before the actual invasion. It has have rebounded since then.
It is worth mentioning that one of the people behind the Ethereum, Vitalik Buterin, has been actively condemning the war since the beginning of the conflict. His views on this can be seen on his official Twitter page.
When it comes to the sanctions, they did not impact cryptocurrencies at once, but the situation is changing as we speak.
According to American media, the President of the United States is looking for ways to block the use of cryptocurrencies on Russian soil, as has happened with other payment methods. Bloomberg reports that the Biden administration was looking into this as early as the 28th of February (the 4th day of the conflict).
This, however, is not an easy task, as it goes against everything cryptocurrencies really are, as Binance itself, one of the leading cryptocurrency exchanges worldwide, has recently stated.
The whole concept of Cryptocurrencies as we know it is to offer privacy to their users, as they’ll have the possibility of having untraceable money, without any links or bounds with governments worldwide. Therefore, sanctioning them can be an almost impossible task.
In short, as things stand, it is unlikely that sanctions imposed by Western governments will have a significant impact on crypto, and will not, therefore, prevent crypto values from continuing to fluctuate, even more than usual, in the world market.
Possible Collapse of Cryptocurrency Stock Market
At the beginning of the Russia’s invasion, there was a general belief that we would see another major collapse of the cryptocurrency stock market, similar to the one that happened at the end of January, 2022. As a consequence, crypto experts and investors began to worry about the future of cryptocurrencies with the continuation of this war.
Now we can confidently say that the great collapse did not happen. Shortly after the war-caused crash, crypto market prices have rebounded back to normal.
Still, that doesn’t mean there hasn’t been any change in the stock market. On the contrary, we have seen a significant decrease in demand for cryptocurrency sales, particularly Bitcoin. This shows that, despite the uncertainty, investors are not worried about what may happen, preferring to keep their cryptocurrencies in order to wait for a rise in the market so they can sell at higher prices.
List of Unstable Cryptocurrencies
At the beginning of 2022, we saw a big movement indicating that we would see cryptocurrency falling in value. Among those that had a bigger collapse, we especially highlight Bitcoin, which fell down by 10%, and Ethereum, which had a 12% drop in its value.
Cryptocurrency’s fall comes against a backdrop of rising government bond yields, causing investors to flee riskier assets and seek out more stable ones.
Because cryptocurrencies are among the most unstable investments at the moment, we have seen this big drop in their values. At the present time, however, we can see that things are back to normal a bit.
Not even the war between Russia and Ukraine managed to influence the cryptocurrency market that much, as it is something that has no connection with world governments. While it is true that there was a drop in the early days of the invasion, it was short-lived and soon the value of most cryptos was on the rise again.
Below, you can check out a list of the main cryptocurrencies that have been unstable this year, so that the investor can be aware of possible future collapses:
* Binance Coin
Cryptocurrency Price Volatility
Unsurprisingly, the price of cryptocurrencies is a rollercoaster ride. Bitcoin, for example, went from $200 in 2015 to $20,000 in 2017 and $12,000 in 2020.
What really creates this huge price swing?
1. The small market is one of the main reasons for this, as it helps to amplify the other factors that cause this volatility. Although many are surprised by the values available across the cryptocurrency market, we need to understand that it is just a small drop in the great financial ocean.
2. While the market capitalization of cryptocurrencies is still in the billions, there are already several others in the trillions. Market liquidity, that is, the availability of exchange or trading an asset, is another very important point. If cryptocurrency trading rises or falls overnight, it will certainly have a significant influence on its time crypto price.
3. Finally, we also give importance to forks. They happen when developers or users of a crypto platform cannot reach a consensus and decide to split the network in two. With that, we see creations like Bitcoin and Bitcoin Cash.
These controversial events result in uncertainty about the future of a project, which results in volatility, as investors try to predict what will happen after the fork and implement new strategies, causing the price to fluctuate.
In the end, cryptocurrencies became more of an investment team than an electronic money system, and as a result, they ended up becoming highly volatile.
Because of this, it was possible to see a change in the values of cryptocurrencies with the war between Russia and Ukraine, as it brought uncertainty to all investment markets around the world, causing the values to fall rapidly in the first days of confrontation.
What does this mean for investors?
For investors, the best thing to do right now is to remain calm above all. There is no need to despair or sell your cryptocurrencies quickly. According to subject matter experts, the best thing to do is stick to your long-term plan and, if you don’t have one, plan it as soon as possible.
This is because, as we mentioned in the previous topic, cryptocurrencies have quite a high volatility and can suffer both falls and rises very quickly and even unexpectedly. Although at the moment we are seeing a normal market, with crypto market prices within the normal for cryptocurrencies, this could change at any time for better or for worse.
Another tip from the experts is to focus on investing only in the two biggest cryptocurrencies on the market, which are Bitcoin and Ethereum, as they are more well-established than their competitors.
However, you should always have less expressive cryptos on your radar, such as Binance Coin (BNB), Avalanche (AVAX), Uniswap (UNI), and FTX Token (FTT).
In addition, when making new investments at such a delicate time as the current one, it is important to use small amounts that you can afford to lose.
Lastly, investors should also keep cryptocurrency transactions on major crypto exchanges for security purposes.
Blocking of Crypto Accounts
Although it goes against basically everything cryptocurrency means, tragic circumstances have boosted rumors that sanctions could go as far as trying to block Russian crypto wallets.
Under the current scenario, a sanction of this nature couldn’t be pulled off directly by governmental entities, but by crypto exchanges themselves.
In fact, that was exactly what happened a few days ago, as major exchanges, most notably Coinbase, have targeted and blocked over 20,000 wallets that were directly or indirectly linked to Russian oligarchs and elite politicians.
It seems like a very extreme measure, and although some may support this action, maybe things can go a bit overboard if they target the average Russian civilian in the future as well. Besides, it also creates a dangerous precedent that can be used in a less dramatic scenario.
Also, this episode involving Russia and Ukraine could be used to ignite crypto regulation talks again, as it has been going on for quite a few years already, mainly within the EU, and even the USA.
Specifically talking about the current financial situation in Russia, this extreme measure could also backlash, and actually be used by the Kremlin as an excuse to escalate and go all-in into a global conflict, as crypto transactions are seen as one of the last remaining available methods for global transactions involving Russians.
Either way, we still need to see the next chapters of this whole situation in order to state something for sure.
Could we See Crypto Falling in the Near Future?
That’s pretty hard to effectively state, as we’ve thoroughly stressed throughout the text, this is a pretty volatile and unpredictable market.
However, given that factors such as external pressure coming from the global community and even regulation talks could, indeed, be the reason why is crypto falling in the near future.
Amongst this uncertain scenario, all we can do is hope for the best, and that the ongoing conflict de-escalate in Ukraine, so that both Ukrainians and Russians may have their lives back to a possible normal, and peace may be sought once again between the two nations and in the whole world.
In short, pay close attention to the next steps involving Russia, Ukraine, and the global community before making any risky investment, and hope for the conflict to end as soon as possible, so that no major damages are done to the crypto world.
1. Why is bitcoin down?
Bitcoin is the main cryptocurrency out there and, therefore, ends up being the first crypto to undergo changes in values due to its high volatility.
2. Why is crypto falling?
As it is a highly volatile asset, any negative change in the global financial sector causes cryptocurrencies to fall or rise in value. This was exactly the case with the confrontation between Russia and Ukraine.
3. Why is crypto market is down?
The main reason for this is that cryptocurrency investors are waiting to see the final outcome of the Russia-Ukraine conflict and so there are not many cryptocurrency sales and purchases at the moment.
4. What makes crypto go up and down?
Several factors influence the change in the value of cryptocurrencies, as they are highly volatile assets. The value will depend on the number of transactions in the market, and on external and internal factors as well.
5. What is the best crypto to invest in now?
Due to the current period of global instability, the safest cryptocurrencies to invest in should be the two largest on the market: Bitcoin and Ethereum.
We are building a professional community and looking for new members to join our team. Check out our careers page and see where you fit with SEObrothers!