Bitcoin traded to a 2-week low with several factors making an impact on its price. Similar effects have been felt across the crypto engine. The fear of a potential Russian-Ukrainianborder dispute is considered to be the biggest factor here. Bitcoin didn’t recover much after reaching a low of around $36,370 on Tuesday afterRussia announced the independence of two separatist republics in eastern Ukraine.
Ethereum also recorded asignificant drop before showing some signs of recovery. XRP also recorded a significant price drop. The price of gold, however, rose while cryptocurrencies were going through a downward spiral.
Russia-Ukraine Conflict: $400 Billion Crypto Crash
Bitcoin’s price fell to a low of $36,370 per coin, which was 20% less than its price a week ago. Ether, BNB, Cardano, XRP, and Solana recorded even sharper drops. XRP and Cardano’s prices feel almost 15% within a period of 24 hours.
This cryptoprice fall has led to the market seeing $400 billion vanish into thin air. The potential military conflict between Russia and U.S.-backed Ukrainehas placed the general financial market in a phase where it wants to reduce risks.
Impact on Risky Assets
Generally, all risky assets, ranging from cryptocurrencies to stocks, have crashed with the situation in Eastern Europe seemingly aggravating. Over the last few years, Bitcoin and some other digital currencies have built a general reputation for acting as hedges againstconventional market fluctuations. However, towards the end of 2021, this market began tradingin tandem with stocks, coming down by almost 50% when the Fed announced its plans to stop the pandemic-related stimulus packages.
Gold, however, has appreciated in value during the time the Russia-Ukraine tensions have soared. It is the traditional asset that investors seek in times of uncertainty.
Recent Surge in Crypto Market
Bitcoin and the general crypto market had been undergoing a massive growth period over the last 2 years. The entire market grew from a combined value of $300 billion to $3 trillion in November 2021, before losing a lot of value. However, even with the slowdown, it is going throughcurrently, the market is still valued at around $1.6 trillion. Ethereum, BNB, Cardano, and Solana have grown even faster than Bitcoin since 2020. This is because investors and traders saw these smart contract blockchains forming the foundation of a decentralized internet.
Impact of Miners’ Selling Decisions on Bitcoin Price
The Bitcoin price has also been under pressure from its growing hashrate. The crypto market’s rally in 2021 attracted tens of thousands of miners. This gave a big boost to the combined computational power relied on by Bitcoin miners all over the world. In fact, this computational power grew almost 4 times over the past 6 months and crossed 200 million terahashes per second.
When the hashrate rises, it becomes more difficult for miners to earn coins. This further makes it harder for them to cover the costs of electricity, hardware, and manpower resources. This forces many miners to sell their coins, thus contributing to a bearish market trend.
Cost of operation is a major factor in mining, affecting the decision to sell or hold new coins. Miners are considered the most natural sellers in the market and their decisions affect prices. According to available data, miners held $114 billion worth of coins in their wallets in November 2021. This amount has come down to $75 billion. More recently, more of these coins have been transferred to exchanges than to reserves, which is a sign of an intent to sell or selling.
Crypto’s Loss is Gold’s Gain
Gold recently touched an8-month high of $1,914 per ounce before losing some of the gains.This seems to be a natural development considering that in a tense market situation, investors are more likely to focus on commodities such as crude oil and goldrather than riskier assets.
While other assets are losing value, gold and gold shareshave benefited from the growing geopolitical uncertainty. A recently released IMF report noted that while BTC price movements have been more in line with risk assets than gold and investment grade bonds, which are haven assets.While Bitcoin has shed its value by over 22% in 2022, gold has added 4.5% to its price.
