Ongoing uncertainty could also push the world's biggest cryptocurrency below $29,000 — a price that has been held since January 2021.
Bitcoin plunged to $36,500 on Tuesday after Vladimir Putin recognized two rebel-held regions of eastern Ukraine as independent states — and ordered Russian troops to enter.
While Moscow maintains the soldiers deployed to Donetsk and Luhansk are on a "peacekeeping" mission, these claims have been rejected by U.S. officials.
The West fears this is an "attempt to create a pretext for a further invasion" — and could open the door to a more substantial military operation in Ukraine.
Tanks and armored personnel carriers have been seen on the outskirts of Luhansk, and Western nations are now preparing to impose sanctions on Russia.
The worsening crisis is sending shockwaves through the global markets — and not just cryptocurrencies. Shares in Russia fell by 8%, and European stock markets also opened down. At the time of writing, BTC has shed 6% in 24 hours, extending to a loss of 16% over the past seven days.
While Ether has plunged by 8% since this time yesterday, smaller altcoins are performing far worse. XRP, Cardano and Solana were all down by approximately 14%.
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Changing Narrative
BTC's performance invalidates the theory that the cryptocurrency serves as a safe haven for investors seeking protection during periods of market turbulence.
By contrast, gold has largely held on to its gains and the price of a barrel of oil has jumped. As 22V Research's John Roque wrote in a research note:
"In the globe’s latest maelstrom — U.S./Russia/Ukraine — Bitcoin, the asset purported to be the answer to every question, has quietly weakened and is notably underperforming its arch-enemy, gold."
The latest declines bring BTC perilously close to falling below $33,184 – lows that were last seen a month ago. Ongoing uncertainty could also push the world's biggest cryptocurrency below $29,000 — a price that has been held since January 2021.
For context, Bitcoin hasn't slid below the psychologically crucial level of $30,000 since last summer. What remains to be seen is whether buyers would be prepared to step into the breach.
With BTC closely correlated to the stock market right now, the cryptocurrency's fate seems tied to how Wall Street reacts to Russia's next moves. At the weekend, U.K. Prime Minister Boris Johnson pointed to evidence that suggests the Kremlin is planning "the biggest war in Europe since 1945."
OANDA analyst Edward Moya wrote in a research note:
"Bitcoin's rollercoaster ride won't end anytime soon, but it could get ugly if Wall Street sees a major selloff if investors begin to expect a prolonged military conflict."
Russia has recently unveiled proposals that would legalize crypto investments for its citizens, but continue to prohibit digital assets from being used as a payment method. Meanwhile, Ukraine has passed a bill to legalize cryptocurrencies — with the country's deputy prime minister suggesting this will help Ukrainians "protect their assets from possible abuse or fraud."
