The correlation of bitcoin with the US stock market may be one of the reasons for the current decline in its price. On the other hand, the devaluation of Eastern European currencies also makes bitcoin a cover against the crisis and a safeguard for capital.
According to Kevin Telegraph, people around the world start their day by seeing red news. But this redness was not just about price charts in the financial markets; The shocking news of Russia’s invasion of Ukraine was the headline of today’s news.
Traditional financial markets, along with digital currencies, have been declining over the past week. Earlier today, Thursday, the downward trend accelerated even faster. However, crude oil traded at its highest price in eight years and exceeded $ 100; But most companies in the US stock market have lost more than 5% of their value.
Read also: Slight price increases following the tightening of US sanctions against Russia; Is the ban in favor of bitcoin?
The Russian invasion of Ukraine on February 24 led to sales of digital currency worth $ 500 billion. As a result, most digital currencies broke their resistance and traded at their lowest quarterly price. The total market value of digital currencies fell 10 percent to less than $ 1.5 trillion in the early hours of Asian morning trading.
Bitcoin is considered a hedge against inflation and crises, and many experts expected the price of bitcoin to be more flexible during a crisis. However, Bankman-Freud himself, CEO of FTX Digital Derivatives and Currencies, did not find a surprising drop in the price of bitcoin.
Farid believes that as the war has created a liquidity crisis in the market, traditional markets and digital currencies have fallen in price. The decline in bitcoin prices is also due to its growing correlation with the Nasdaq index (NASDAQ) and the SP 500, a correlation that recently reached its highest level in two years.
Farid tweeted about it:
Yesterday, the S&P 500 fell by about 4% and Bitcoin by about 8%. Why? Obviously, stock prices are falling because there is a war and the war is generally bad.
Why is bitcoin facing a drop in price? Because if the situation in the world worsens, people have less money. It is based on the sale of bitcoins and stocks and … to pay for post-war contingencies.
Referring to the instability of Eastern European currencies in this situation, Bankman Farid suggested that Eastern European investors use bitcoin as a substitute for their currencies.
Farid adds in this regard:
Eastern European currencies and financial systems in general have become volatile. Investors there may be looking for a suitable alternative. If you were already in Ukraine, where would you invest your money?
Investors are divided into two categories: fundamental and algorithmic. Farid pointed out that fundamental investors also look at market conditions and sentiment, while algorithmic investors prefer to use data.
Fundamental analysts offer buying bitcoins; Because bitcoin is known as a protection against crisis. While algorithmic investors recommend the sale of bitcoins; Due to the high correlation of bitcoin with the stock market, the data have one version for both.
Accordingly, the current price of bitcoin is the result of pressure and attraction of prices from fundamental and algorithmic investors.
There is a battle of pressure and tension between fundamental investors and algorithmic investors. Fundamentalists believe in buying bitcoins, and algorithmic traders believe in selling bitcoins. Bitcoin has reached a point where the pressure of the two reaches equilibrium with an 8% price reduction. So which group is right?
The price of bitcoin shows signs of improvement, rising from $ 34,459 to over $ 35,663.
The outlook for the market after bitcoin against the background of the crisis in Ukraine; The FTX Exchange CEO’s assessment first appeared in Digital Currency.