Crypto is failing to live up to its reputation as a safe haven amid the conflict with Ukraine according to market analysts.
Bitcoin’s price has experienced wild swings as Russian forces advanced on Ukraine this week, with the world’s oldest crypto currency touching lows of $34,750 before climbing above the $40,000 mark. Commentators have remarked that the sensitivity of crypto assets to fluctuations of the stock market amid political upheaval undermine arguments that digital currencies such as Bitcoin and Ethereum are a safe haven for investors.
“Cryptocurrencies such as Bitcoin, perform as highly speculative and volatile assets that involve assuming significant risk for the potential of high gains,” said John Reade, the chief market strategist for the World Gold Council.
“While it has been suggested by some analysts that cryptocurrencies can play a similar role to gold – the current market reaction to this geopolitical event is highlighting the differences rather than similarities between the two assets,” he continued.
“Gold is highly liquid and has a proven track record for serving as a safe haven asset – a reputation it is living up to amidst the current crisis in the Ukraine and Europe,” Reade added, encouraging investors to shore up their portfolio’s with gold as well as crypto.
“Bitcoin is clearly facing local demand in catastrophic times but these are small pockets of demand as more widely across the world, Bitcoin hasn’t been the equivalent of digital gold which crypto fans had hoped for,” commented Susannah Streeter of Hargreaves Lansdown.
“Overall since the Ukraine crisis has erupted, it has swung down as equity market sell offs have intensified with the asset down 16 per cent year to date,” Streeter continued, noting that “crypto assets have been shown to be highly sensitive to the fortunes of the stock market.”
Bitcoin shows its ‘relevance’
By contrast, Charlie Morris, the chief investment officer of market analytics platform ByteTree praised the performance of Bitcoin which is not subject to the same security and political risks as traditional payments infrastructure.
“Bitcoin is showing quite a lot of resilience,” said Morris, noting that the world’s largest crypto currency is still sustaining net inflows from investors and healthy network activity at the $40,000 price mark.
“It’s showing its relevance,” Morris continued. “If you are a Russian or Ukrainian and your bank account is frozen – whether you support the war or not – you can see the value of Bitcoin.”