Bitcoin’s digital gold status, touted as a next gen safe haven, is taking a hit. The cryptocurrency’s price has plummeted since Russia’s military invasion of Ukraine. But the financial reality would be more nuanced than this red that dominates the market.
The worst-case scenario seems to be coming true. A rain of Russian missiles has fallen on Ukrainian cities. An armed conflict on European soil with Vladimir Putin threatening world war to anyone who opposes him.
The largest cryptocurrency by capitalization, bitcoin, has blushed sharply in reaction to this escalation of hostilities. Its curve plunged in the first few minutes after the bellicose statement overnight. Its price is now more like $30,000 per unit than the $30,000 held just yesterday.
Compass for other digital currencies, BTC has dragged in its fall Ethereum (ETH), Ripple (XRP), Cardano (ADA) whose losses oscillate between 10 and 20%. While some cryptos are resisting, the entire market has collapsed, giving up more than $1.5 trillion at the time of writing.
Contagion through the mainstream markets
This plunge of bitcoin and its alter egos indicates that the “crypto exchange” is behaving roughly the same as the traditional financial markets, with the European stock exchanges experiencing a “violent air pocket due to the Russian attack” like that of Moscow or other stock market indicators.
Bitcoin seems to be trading like shares of listed companies instead of reacting like gold, a safe haven, whose price is rising following the clash between Ukrainian and Russian armies.
Some will argue that the financial scenario was binary. Heads or tails. BTC could go up or down. But bitcoin’s bearish behavior has surprised smart observers nonetheless.

Financial arsenal
That being said, the young billionaire entrepreneur continues, the conflict situation is negatively impacting financial systems and thus Eastern European currencies. Ukrainians might look for alternatives in cryptocurrencies. Last September, the Ukrainian parliament passed a law legalizing bitcoin, the first step in a campaign to establish a thriving crypto business in the country.
At the same time, the Russian president has recently been sending out more and more signals of openness towards bitcoin and digital currencies. Against the advice of his own central bank. But the Kremlin has studied the possibility of treating BTC as a foreign currency, such as the US dollar. Thus formalized, bitcoin strengthens Moscow’s financial arsenal to escape sanctions, especially from the historical rival Washington.
We try to attribute human intentions to all these financial transactions, which would be marked by geopolitical strategies, monetary philosophies and other financial psychologies. This is to forget that the markets, especially those of crypto-currencies, some of which are automated, are also driven by algorithms.
Filled with data, these computer protocols dictating six-figure investments in less time than it takes to read this sentence reinforce correlations with traditional stock market indices.
Risk aversion and BTC at a discount
Or maybe the crypto market is mechanically suffering from the risk aversion that tends to dry up other financial markets in times of war. With everyone busy selling (a little, a lot, desperately), markets become less liquid, prices more volatile. What investor is going to massively (re)buy bitcoin at this point?
This fall in crypto currencies would tend to show that this technology sector remains a nascent asset class and is not yet replacing the millennial asset of gold. However, there is some data to put the current plunge into perspective. Starting with the fact that many investors are holding on to their bitcoins.
Analyses enabled by the blockchain indicate that the portfolios of “holders”, these long-term holders, contain record volumes of BTC (72.5%). And this despite the drop in price. Bitcoin’s status as digital gold remains valid. With this status, the potential safe haven capabilities of the world’s largest cryptocurrency.
Finally, let’s point out that there are some indicators that give bitcoin holders some comfort. On the Coinbase and Binance crypto exchanges, the “order books”, i.e. the lists of orders that reflect the interest of buyers and sellers for an asset, signal upcoming technical support.
The bitcoin sell-off is certainly not over, but investors are standing by to buy BTC if the price moves between $30,000 and $28,000. This will possibly cushion the fall.