The Ukraine Crisis led to high price volatility of cryptocurrencies

08 March 16:18

[TL; DR]

The Russian-Ukrainian war which broke out on 24 February 2022 led to a fall in prices of mainstream cryptocurrencies.
BTC, ETH, Binance Coin, Cardano, Avalanche and Polkadot are some of the cryptocurrencies whose price fell significantly within 24 hours after the start of the Russian-Ukrainian war.
The large donation in crypto assets within the second week of the war resulted in appreciation of ETH and BTC.
Price volatility affects the prices of cryptocurrencies stored in both digital wallets and crypto exchanges.

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The cryptocurrency market lost about 10% of its value within 24 hours of Russia’s invasion of Ukraine on 24 February 2022. According to CoinMarketcap, the overall cryptocurrency market dipped from about $1.8 trillion to $1.6 trillion. Incidentally, the Ukrainian crisis affected the various types of traded assets including stocks. However, the values of stablecoins remained constant over the period.

Which cryptocurrencies were affected?

The prices of both ethereum and bitcoin fell after the Russian invasion of Ukraine. Within 24 hours following the invasion bitcoin dropped below $35 000 while ethereum fell below $2 400. In the same period, the dominance of BTC was 42.42%. The other cryptocurrencies whose values fell significantly include Cardano, Avalanche and Polkadot. Specifically, the price of Cardano dropped by 18, 49%, Binance Coin fell by 12.34% and Solana by 10.44%. Similarly, the prices of the memecoins Dogecoin and Shiba Inu fell with large margins as well.

Source: Pixabay

For example, the value of Dogecoin dropped by 17.90% while that of rival Shiba Inu coin fell by 16.92%. On the other hand, the value of Dogelon Mars went down by 20.52% and that of Samoyedcoin by 7.88%. Generally, the prices of the mainstream cryptocurrencies fell significantly after the invasion of Ukraine.

One analyst, Ben McMillan, chief investment officer of IDX Digital Assets, says that the cryptocurrencies reacted to the Russian-Ukrainian war news in the same way as the stock markets. He further contends that bitcoin and ether, for example, are risk-on assets whose values fluctuate just like equities. More to this, Laura Shin, a crypto podcast host and author believes that the reason for cryptocurrencies to move in sync with the capital markets is their increased adoption.

Other blockchain analysts conclude that the Russian-Ukraine crisis has confirmed that cryptocurrencies are highly volatile assets. As such, investors should remain calm in the current situation and avoid gut-reactions to the changes in the cryptocurrency market. According to many analysts, what is not clear now is how the cryptocurrency market will behave in the medium to long term period following the Ukraine crisis.

The rise of bitcoin price

Several days after the start of the Russian-Ukrainian war, the price of BTC rose again. As a fact, as on March 2, the price of bitcoin had increased by 13%, trading at around $44 000. Ether had also bounced back, trading at around $3 000. Analysts have given different reasons for the increase in the value of bitcoin within that period. The first reason is that the Russians are buying the dip, promoting a steady rise in the price of bitcoin. They are buying some cryptocurrencies in order to evade the economic sanctions imposed on the country.

Source: Pixabay

The other possible reason for the rise in prices of ether and bitcoin are the donations which Ukraine got. Many people donated a lot of funds in the form of bitcoin and ETH. Particularly, an estimated $102 million worth of crypto assets has been donated to Ukraine so far. Many people donated cryptocurrencies since this is an easy way of bypassing financial institutions that might block payments to the country.
As we have noted above, the value of various cryptocurrencies fell as a result of the Russian-Ukraine conflict. The prices of these crypto assets fluctuate irrespective of whether they are in crypto wallets or on exchanges. Many exchanges, such as Gate.io, store large volumes of digital assets including cryptocurrencies. This is because people carry out various transactions, such as transfer and trading of these assets.

Digital transactions on exchanges

In this instance, we focus on a few transactions which people carry out on exchanges including Gate.io. People can buy, trade, hold, lend and borrow cryptocurrencies at Gate.io. The good thing about Gate.io is that it has many digital assets including cryptocurrencies and NFTs, which people can buy, hold, sell and trade.

Spot trading
There are millions of people who do spot trading at Gate.io. As you may know, spot trading is the process of buying and selling cryptocurrencies at the market rate. The goal here is to immediately acquire the asset such as ETH or BTC. People choose spot trading in order to gain from several small trades.

Crypto lending
People who have idle cryptocurrencies can lend them to margin borrowers in return for interest. This is because Gate.io is a peer-to-peer lending platform. With this in mind, there are no intermediaries or hidden costs in the lending process. Therefore, people who hold cryptocurrencies for a long term can benefit through lending them out. And remember, you can also borrow tokens when you need immediate funds to cover some pressing needs.

Futures
Another trending product on Gate.io is futures. A commodity futures contract is an agreement to purchase or sell a commodity at a specified date and price. Therefore, futures hinge on speculating the price movements of particular assets.

Buying cryptocurrency with credit cards
You can buy cryptocurrencies using your credit card on Gate.io. Users from various countries and regions around the world can buy mainstream cryptocurrencies such as BTC and ETH using their credit cards. For example, users can use their VISA credit cards to buy the cryptocurrencies using USD, Euro and British pounds (GBP).

Conclusion

The Russian-Ukrainian war resulted in the fall of the prices of the mainstream cryptocurrencies in the very short run. This showed that the cryptocurrency market is affected by environmental shocks such as wars in a similar way as the traditional financial markets. However, as many purchased large volumes of BTC and ETH during that dip, their prices increased again. Many people who want to purchase cryptocurrencies during the current dip using credit cards can do so at Gate.io.

Author:Gate.io Researcher：Mashell. C.
This article represents only the views of the researcher and does not constitute any investment suggestions.
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