Bitcoin up by over 13% since the invasion of Ukraine

By Raffaele Redi

The digital gold has gradually started rebounding in the past week’s trading

Bitcoin price chart                                 
Bitcoin has broken back through the 40k resistance in the past few days – Photo: Shutterstock

War and inflation could help bitcoin and cryptocurrencies mature, according to experts.

Since the Russian invasion of Ukraine on 24 February, the digital gold (BTC) has witnessed an over 13% increase in its price, and currently sits at around $42,508. That represents an increase in excess of $5,100, meaning that bitcoin outperformed both gold and the stock market during this period.

“Facing the Federal Reserve inflation and war, 2022 may be primed for risk-asset reversion and mark another milestone in bitcoin’s maturation. It’s unlikely for bitcoin to stop outperforming gold and stock market amid bumps in the road as the Fed attempts another rate-hike cycle,” said Mike McGlone, a senior commodity strategist at Bloomberg.

Despite speculation about cryptos being used by Russia as a way to bypass NATO sanctions and possibly fund the invasion, so far the crypto markets have not proved favourable to Russia, with experts pointing at oil prices instead.

“Crude oil price spike to $130 may be ample fuel for a reversion toward its persistent mean around $50. Forces for lower prices may be greater than in the aftermath of the 2008 peak due to unprecedented ability and motivation. Elevated crude oil funds Russian aggression,” said McGlone.

At the time of writing, crude oil is trading at $111.45 while a barrel of Brent is changing hands for $115.15.

Bitcoin drawdown and future projections

The digital gold started gradually rebounding over the course of the past week’s trading, with the bullish side prevailing the sell one. Interestingly, most of the sales happened during Asian trading hours, according to analysts.

“Current buy-side demand appears to be dominated by US and EU markets, with the majority of sell-side sources during Asian trading hours,” said Glassnode analysts.

According to the analysts, Bitcoin’s network utilisation and on-chain activity remained firmly within bear market territory, albeit it is now recovering.

“The amount of BTC supply absorbed during the current drawdown is similar in magnitude to the period after the March 2020 sell-off. However, it remains modest at best, and is a key metric to keep an eye on in coming weeks,” said analysts.

“Derivatives markets are currently pricing in historically low implied volatility, and futures premiums. Such market structure has historically preceded periods of very high volatility, and most often to the upside,” they added.

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