Renewed fears of the possibility of an invasion of Ukraine by Russia affected most of the global markets, including the market for risky assets.
Bitcoin fell below $41,000, the price of the coin fell by 7%, while the price of Ethereum, the second largest cryptocurrency, fell by 6%, and Polkadat led the decline of cryptocurrencies with smaller capitals.
Barbara Matthews, CEO of BCMStrategy, analyzed the situation by saying:
The geopolitical situation in Europe and Ukraine has a serious impact.
However, I believe that the continuation of monetary policy in this way contributed to generating a state of uncertainty and volatility in the markets.
On Wednesday, the Federal Reserve released the minutes and summaries of its January meeting, which reinforced the Fed’s determination to act quickly to cool rising inflation by tightening monetary policy.
Markets seem to be anticipating the situation, as the response has been mixed or relatively muted.
Recently, Bitcoin, which shows a strong correlation with the movement of US stock indices, gained a close relationship with the S&P 500, as they fell together in the minutes after the decisions of the Federal Reserve were issued.
Earlier this month, Bitcoin’s 30-day correlation with the Nasdaq Composite reached 0.73, close to its highest level since 2020.
The figure suggests that the two asset classes are showing similar moves, with investors viewing digital assets as risky, along with Nasdaq’s prominent technology shares.
Matthew Siegel, Head of Digital Asset Research at VanEck Associates commented:
Big moves in stocks, or erratic rises in crude and bond yields, could lead to exaggerated declines in cryptocurrencies.
He noted that bitcoin’s volatility appears to be showing a long-term downtrend, with the Nasdaq 100 showing more standard deviation movements than the five-year average compared to the cryptocurrency.
Bitcoin network participants enjoyed a consistent outperformance against stocks, but despite their earlier rally, they are showing a relatively downward trend.
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