The cryptocurrency market traded in panic at the start of the day after a wave of selling in Bitcoin and altcoins after Russian President Vladimir Putin took the escalating conflict with Ukraine into new territory with large-scale attacks. Cryptocurrencies had started the day with heavy losses, which they managed to reverse by the end of the day.

After a huge decline of up to 18%, the main cryptocurrencies on the market reversed trend and most of them are trading higher. Bitcoin is up almost 3% at US$38,700, while Ethereum is at US$2,600 and Terra is up as much as 5%.

Global markets reacted with sharp falls for risk assets and rises for safe havens, with rises in oil and gold. Stock markets suffered and fell by up to 4%. Bitcoin traded near the lows of US$35,000, down almost 10%. Ethereum, the second largest cryptocurrency in terms of market capitalisation, fell 13% to trade at US$2,300.

Bitcoin has accumulated falls of 20% in the last week and there are more than a few who believe that US$30,000 is back in play.

Apparently, the Russia-Ukraine crisis is affecting all risk markets at the moment, not just Bitcoin. Besides, the constant swings of good news and bad news make it difficult to value and trade the market at the moment.

The other cryptocurrencies will also feel the blow of the Ukrainian war, since, when Bitcoin is affected, the whole crypto-industry suffers. There is also the fact that higher energy prices make cryptocurrency mining more expensive. So that is also a fundamental reason that prevents Bitcoin from being a safe asset in the current environment. 

Since 2020, bitcoin and other cryptocurrencies have behaved like a risky asset, even closely correlated with the movements of stock market indices such as the S&P 500, according to the latest research by the International Monetary Fund. This correlation rules out any resemblance between bitcoin and gold (the safe-haven asset par excellence).

Investors have once again sought refuge in gold, which has risen by almost 2% and has reached close to US$2,000 per ounce, although by the close of the European market it has deflated.

However, being a risk asset is not negative per se. These are assets that tend to outperform when the economy is growing and uncertainty is low because they benefit more from an improvement in economic activity. Cryptocurrencies or equities are risk assets.

On the other hand, safe assets are those investments that in times of uncertainty, economic recession or financial crisis (periods of economic risk), may be able to maintain stability or even increase their prices. This is the case of gold, the Japanese yen or the US dollar.

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