Despite Recovery, Bitcoin and Cryptos Have More Room to Fall, Say Analysts, Pointing at a Buy Signal
While the crypto markets have been recovering on the second day of Russia's attack on Ukraine, crypto industry insiders have warned that digital assets may have further to fall -- and argued that a bottoming in stocks could be taken as a buy signal for crypto.
The crypto market saw a broad recovery Friday morning in Europe, as more observers touted cryptoassets’ role as censorship-resistant money in the face of Russia’s invasion of Ukraine.
At 12:47 UTC on Friday, bitcoin (BTC) was up nearly 10% for the past 24 hours, trading at USD 38,926. At the same time, ethereum (ETH) was up more than 12%, trading at USD 2,684. The two most valuable cryptos remain down by 4% and 7%, respectively, over the past week.
The gains for the crypto market today came after nearly all risk assets fell sharply yesterday as Russia launched a full-scale attack on Ukraine.
Just as yesterday, the traditional safe haven, gold, rose again today, trading up by 0.26% for the day to USD 1,909. The relatively minor gains today come after the yellow metal yesterday exploded higher to reach above USD 1,970 – a level not seen since September 2020.
Commenting on why bitcoin was falling and gold was rising in the face of war in Ukraine, the popular bitcoin on-chain analyst Willy Woo suggested the selling is temporary, with bitcoin for now remaining an “untested” safe haven.
Meanwhile, Mikkel Morch, Executive Director at Digital Asset Fund ARK36, stressed that BTC not only erased all Thursday's losses, but it also, in contrast to major stock indices, BTC hasn’t actually recorded a lower low.
"This small detail could be of great significance in terms of the talk around bitcoin as a safe haven asset. Following yesterday’s selloff, many commentators noted that gold actually proved to be a safe haven while bitcoin reacted like a typical risk asset. However, bitcoin’s strong recovery does suggest that for investors with a higher tolerance for risk, or looking for a high risk-to-reward ratio, buying bitcoin in a risk-off environment may be a good bet against uncertainty in the long term," Morch said, adding that the situation is still volatile and the USD 40,000 levels are still the resistance.
"Unless Bitcoin meaningfully breaks this barrier, revisiting the range lows or even the USD 30,000 support is still very much on the table in the short term," he said.
Also, Mati Greenspan, founder & CEO of Quantum Economics, said in a newsletter today that it “doesn't make much sense” for anyone to sell their bitcoin in the face of the situation.
“[I]n my mind, all the uncertainty only increases my inclination to own bitcoin, and I'm pretty sure that I'm not the only one who feels this way,” he said.
Meanwhile, according to Nik Bhatia, author of the bitcoin-focused book Layered Money and a finance professor at the University of Southern California, the invasion of Ukraine already means that the US Federal Reserve will “probably” avoid 0.5 percentage points rate hikes this year, as some have speculated. Instead, the central bank is now likely to stick with a series of 0.25 percentage points rate hikes, as originally planned.
Still, in what is likely a reference to a discussion he had with TV personality Stacy Herbert, Bhatia added that “this idea that a Russian invasion will cause the Fed to reverse its commitment to fight inflation is wrong.”
Commenting on the bitcoin price, Bhatia said the coin “held an absolutely massive level of ~ [USD] 34,300 today,” adding that this price means the chart has formed “a higher low” compared to its January 23 low of USD 32,900.
Further, the crypto-focused financial services firm BitOoda suggested in a report from yesterday that investors should “maintain existing positions” in digital assets in the face of the current situation.
The firm added that it would “add to positions at lower levels and / or as markets stabilize,” and said “a meaningful decline in the equity VIX [volatility index] and a broader bottoming action in stocks” would be a good indicator for when to buy more crypto.
Meanwhile, the crisis in Ukraine has also sparked interest in bitcoin and crypto use cases more broadly, potentially contributing to demand for the coin.
Despite the war being only two days old, bitcoin has already played a role in the conflict, with more people learning about its properties as censorship-resistant money. According to a CNBC report from yesterday, bitcoin donations to Ukraine’s army are “soaring” after Russia started its offensive.
The report cited data from blockchain analytics firm Elliptic that showed that close to USD 400,000 had been donated to Come Back Alive, a Ukrainian nongovernmental organization that provides support to the military.
The news of bitcoin’s role in the fundraising today followed a report from Elliptic earlier this month saying groups on both sides of the conflict have used crypto in their efforts to raise funds from supporters.
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