Crypto market capitalization plummeted by $200 billion in 24 hours after Russia declared war on Ukraine. Focus now turns to potential sanctions by Western countries against Moscow. U.S. President Joe Biden said the United States and its allies will respond decisively to the attack, TOI reports.
The U.S. and its European allies had imposed some sanctions against Russia earlier this week, although market reaction to the move had been somewhat positive given their limited nature. But Biden had promised stricter action in the event of any escalation.
Sanctions this week had targeted two Russian banks, certain Russian elites, and the country’s debt market. But they had stayed clear of Russia’s key oil exports to Europe, as well as any large banks.
Tensions along the Ukraine border have slammed most financial markets this month. Stocks have slumped, while crypto market capital plummeted nearly $500 billion from highs hit earlier this month.
Safe-haven assets have been among the sole beneficiaries, with stablecoins seeing enormous volumes. Gold prices have also spiked.
On Thursday, Bitcoin sank below a key support of $35,ooo, while most altcoins suffered double-digit declines.
Any strict action from the West is likely to spur more losses, with the conflict set to dominate headlines in the coming days.
Cryptocurrency prices, like the broader financial markets, are likely to be volatile in the coming weeks, influenced heavily by events related to the Russia-Ukraine conflict. Furthermore, interest rate hikes by the Federal Reserve are expected to put downward pressure on bitcoin prices.
Naeem Aslam, Chief Market Analyst at Avatrade
What comes next?
After steep losses, markets are likely to adopt a wait-and-see approach on how the situation unfolds.
During Russia’s annexation of Crimea in 2014, the tech-heavy Nasdaq stock index had lost about 4.4%. But it had recovered sharply afterwards, even hitting record highs later in the year.
Given Bitcoin’s tendency to trade in line with U.S. tech stocks, the market could see a recovery later this year, as sentiment improves.
But rising inflation and interest rates are likely to prove a hurdle.
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