The Ukraine War: How Russia’s Aggression Affected Bitcoin & Crypto and What Might Happen Next

Simon Chandler
Last updated: | 7 min read
Kyiv. Source: Twitter/@IAPonomarenko


  • The see-sawing stagnation of the crypto market at the moment is the result of several factors, and not just the Ukraine war.
  • “The political instability will once again highlight bitcoin’s main goal of being a transparent, open-source, peer-to-peer network not controlled by a single administrator or central bank.”
  • The continuation of the war could serve as a catalyst for bitcoin’s transition from a risk-on to a risk-off asset.

More than three weeks in and the Ukraine-Russia war is still raging, despite negotiations over a possible peace settlement. While the human costs of the war are something that can never be repaid, the war has also had a noticeable impact on the global economy and financial markets, including the crypto market.

Back in January, analysts predicted that direct armed conflict between Russia and Ukraine could result in significant losses for bitcoin (BTC) and other cryptoassets. This has been borne out to some extent by the ensuing war, with the price of bitcoin initially responding to Russia’s invasion on Thursday February 24 with a 7% drop from about USD 37,500 to USD 34,740.

However, bitcoin has since recovered to a price of around USD 40,600 (as of writing), with industry figures telling that the war has, to some extent, strengthened the idea of the cryptocurrency as an alternative to fiat currencies, as well as stocks. But, while some say that the ongoing war could enhance the relative value of bitcoin, its longer term effects on the global economy may continue to drag down the crypto market for some time.

War, inflation, and interest rates

Analysts tend to affirm that the see-sawing stagnation of the crypto market at the moment is the result of several factors, and not just the Ukraine war.

“Investors will generally rotate out of perceived riskier assets when uncertainty arises. That’s why we’ve seen cryptoassets come under pressure on occasions during this war when tensions have escalated,” said eToro senior analyst Simon Peters.

Despite acknowledging the impact of the war on the crypto market, Peters suggests that it’s the pre-existing state of the global economy that’s mostly responsible for dragging it down. He also notes that, historically, crypto has witnessed a bear market of some kind roughly every four years or so, with the last being in 2018.

“High inflation and slowing growth in the developed economies such as the US could be weighing on sentiment also, as investors look for clarity from central banks as to what policy decisions will be made to combat these,” he told

This is more or less the consensus view among analysts, with Bloomberg Intelligence’s Mike McGlone also suggesting that the crypto market needs some time to cool down after ballooning “in the midst of a global speculative and inflation frenzy” last year.

“Declining cryptos are part of the ebbing tide and the US stock market is a primary extended asset at risk of normal reversion, notably as the market faces central banks focused on reducing inflation. Assets that have rallied too much are at greater risk of reversion,” he told, before suggesting that altcoins are at greater risk than bitcoin.

Again, most analysts point to the fact that bitcoin and other cryptoassets seem to be correlated with stock markets at the moment, meaning that they go down for the same reasons that stocks go down.

“[Banks and other financial institutions] treat bitcoin and crypto as a ‘risk-on asset’, which means they tend to sell when they’re nervous about the economy. The Ukraine conflict has been weighing heavily on stock markets for several weeks, and the crypto markets have gone down with them,” said analyst Glen Goodman, author of The Crypto Trader.

What if war continues for months?

With the war lasting almost a month, the question arises as to how it could undermine global markets, including crypto. Because with the conflict sending oil and gas prices to new highs, this inevitably has a knock-on effect on inflation and asset prices.

“The Ukraine conflict would normally be classed as a small war, but the impact of sanctions on Russia could have a more severe impact on the global economy. As crypto is tracking stocks closely, it feels the impact of these recessionary pressures,” said Glen Goodman.

But while analysts also expect the war to weigh down on stocks for as long it lasts, some say that it could have more positive effects on bitcoin.

“What’s important in all of this is the political instability will once again highlight bitcoin’s main goal of being a transparent, open-source, peer-to-peer network not controlled by a single administrator or central bank. This means that even if banks are closed and local currencies fall in value during times of instability, citizens will still have access to capital through crypto,” said Simon Peters.

This analysis is supported by reports of a surge in cryptocurrency transactions in Ukraine and Russia, driven by restrictions on withdrawals (in Ukraine) and also inflation (in Russia).

If the war deepens, some analysts suspect a recession could follow, which may in fact end up playing into bitcoin’s favor. 

“The war is likely to tilt the world into recession and I expect normal reversion of crude oil prices, toward USD 50 a barrel, along with the collapse of the Russian economy and related deflationary forces, which should enhance the value of bitcoin. The firstborn crypto is well on its way to becoming the global digital collateral benchmark, in a world going digital,” said Mike McGlone. 

Bitcoin and crypto as alternatives

It’s possible that, the longer the war endures in Ukraine, the more people will be forced to use bitcoin and other cryptoassets. This has been reflected in the fact that Ukraine’s President Volodymyr Zelenskyy recently signed off on a new law that grants legitimacy to cryptoassets, allowing exchanges to operate legally and recognizing the right of citizens to hold their wealth in the form of crypto.

“I think the narrative of bitcoin as an open, permissionless payments network has certainly been strengthened, for the good and bad,” said Simon Peters. 

“Good in the sense that with traditional financial systems becoming less effective or being frozen out of them completely, crypto provides a way to be able to still move capital and transact, and also potentially a medium to protect wealth where the domestic currency is significantly becoming devalued.”

However, with fears that Russia and its oligarchs may attempt to evade sanctions via crypto, Peters also admits that this narrative is “bad” in the sense that an open, permissionless payments network could theoretically make economic punishments less effective. That said, he affirms that Bitcoin is fundamentally neutral, while it’s also worth pointing out that its blockchain is completely public and transparent.

For Mike McGlone, the continuation of the war could serve as a catalyst for what he expects will be bitcoin’s transition from a risk-on to a risk-off asset. He cites its relative outperformance in 2022 against the NASDAQ 100 Stock index as an indication of this, noting that it’s down about 19% vs. closer to 15% for bitcoin to March 14, despite the crypto trading with about 3x the volatility of the Nasdaq. 

“Divergent strength is the takeaway for bitcoin. Once the dust settles on the overdue mean reversion process in the stock market, facing war and Federal Reserve restraint, bitcoin should come out ahead,” he said.

Of course, war — much like the crypto market — isn’t amenable to exact predictions, so who knows how long this war in Europe will last and how badly it will impact the crypto. That said, the market’s total capitalization is actually higher now than it was when Russian forces invaded Ukraine on February 24.

But once again, the human costs of the war are something that can never be repaid.

Learn more: 
Ukraine Launches Crypto Fundraising Site With FTX as Donations Slow Down

Russia Sanctions May Lead More Countries To Consider CBDCs, Ex-Central Banker Says

Ukraine War Raises Questions About the ‘End of Monetary Regime’ and Role of Bitcoin 
Freezing Russian Reserve Assets Marks End of Monetary Regime; Gold, Bitcoin to Rise – Arthur Hayes

Russia Sanctions Means Countries May Transition to Bitcoin Reserves – Pantera’s CEO

Bitcoin, the Ukraine Crisis and the Central Bankers Dilemma

What Can We Learn from Canadian Crypto Freeze as War in Europe Rages On?

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Could the Ukraine Invasion Spark a Global Financial Crisis?