Bitcoin, the Ukraine Crisis and the Central Bankers Dilemma
James Butterfill is Investment Strategist and Christopher Bendiksen is the Bitcoin Research Lead at major European digital asset investment firm CoinShares.
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Bitcoin (BTC) had an immediate price response to the Ukraine invasion when the news broke early this morning. It has become evident that, at present, bitcoin is behaving as a risk asset, with prices dropping below the technical resistance levels of the 50 day and 200 day moving averages.
This has been a perfect storm for bitcoin through the combined threat of interest rate hikes across the major economies, numerous regulatory proposals, and now geopolitical instability in Europe shaking global markets, pushing bitcoin prices down by 23% year-to-date. Yet again however, we don’t believe this changes the long-term supportive fundamentals for bitcoin.
We know that Bitcoin’s identity, i.e. the predominant narrative driving prices at any given time, remains very fluid. At present the predominant narrative is being driven by risk and interest-rate-sensitive speculators and bitcoin is now moving similarly to other risk assets. This does not detract from its properties as a real asset which we have discussed at length here.
It is clear to us that bitcoin is still in a process of establishing its identity and this is a process that could take decades. It is reasonable to assume that, during this period, different people will use bitcoin for different purposes, based on their own needs and the monetary properties offered by bitcoin.
As we’ve previously written, some of bitcoin’s fixed properties such as its limited supply and confiscation resistance, makes it highly suitable as a safe haven asset over the long term. This does not however mean that everyone will use it
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