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February 27, 2022

What the Ukraine Russia Invasion Means For Bitcoin Future

The crypto market has been impacted by Russia’s military activity against Ukraine. While Sam Bankman-Fried is still undecided about Bitcoin’s long-term prospects in the middle of the crisis, he has identified numerous scenarios that could play out in the market.

SBF, as Bankman-Fried is known, stated in a lengthy Twitter thread that market dynamics in a war situation are highly unpredictable. Regardless, the FTX CEO believes the Bitcoin market might go in one of two paths, depending on how different types of investors trade.

For one thing, the main crypto could be ruled by fundamental investors. Because they are focused on the benefits of Bitcoin, these investors remain unaffected and even acquire the asset during times of panic.

On the other hand, algorithmic investors, as he refers to them, are skeptical of Bitcoin. The benchmark cryptocurrency is viewed as a risk asset that is correlated with the stock market by these investors. As a result, when the stock market reacts to hostilities, they liquidate their Bitcoin positions.

“Fundamental investors are neutral, but algorithmic investors see the S&P500 go down 4%, and so expect BTC to go down 4*4%=16% based on historical studies.”

However, SBF admits that it’s still unclear which side of the divide investors should be on. This is due to the fact that no one viewpoint can be regarded correct. But, he says, in the long run, these conflicting forces will tend to collide in the middle of the market.

The crypto executive concludes that the Bitcoin market is in a different phase than it was a year and a half ago based on this data.

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SBF observes that war is still a net negative event in the world, particularly for the regions participating in the conflict.

Other market participants agreed with SBF’s judgment. On-chain activity, according to Ki-Young Ju, CEO of Crypto Quant, now points to the scenarios that are already playing out.

Institutional investors who acquired Bitcoin directly from the market, according to Ju, were not selling. Those using algorithmic trading bots, on the other hand, were dealing with the most valuable crypto-like tech stocks.

The issue has elicited reactions from prominent figures in the crypto sector. Vitalik Buterin, co-founder of Ethereum, has criticised Russia’s decision to abandon peace talks and invade Ukraine. Buterin, who is of Russian nationality, has declared that he supports Ukraine.