Cryptocurrencies including bitcoin and ethereum nosedived on Thursday morning as investors reacted to Russia’s ruthless invasion of Ukraine — then made a dramatic recovery in the afternoon.
Bitcoin fell about 4.5% on Thursday morning before surging to trade 3.2% in the green at $38,500 late Thursday in New York. Meanwhile, ethereum fell 6% to about $2,430 before recovering to be up 2.3% at $2,650 over the same period of time, according to Coinbase data.
Smaller cryptocurrencies took an even wilder ride, with XRP plunging 12.6% before recovering to be down just 1.2%. Cardano fell 9.7% before recovering to just 1.0% in the red, while Soloana was up 1.9% after having plunged 9.0% in the morning.
While some supporters of cryptocurrencies argue they can offer gold-like insulation from stock market turmoil, that was not the case on Thursday during the greatest world conflict to erupt since cryptocurrencies were created.
Every single one of the most popular cryptocurrencies had fallen more than the major US stock indexes on Thursday morning, then recovered along with the rest of the markets.
“Bitcoin is not a hedge against geopolitical risks,” Vienna Institute for International Economic Studies economist Philipp Heimberger declared on Twitter in response to Thursday’s plunge.
Russia is responsible for 13.6% of the world’s cryptocurrency mining, making it the third-largest producer after the US and Kazakhstan, according to data from Cambridge University. Ukraine’s role in global crypto mining is negligible.
As the Biden administration and European leaders prepare to unveil sanctions against major Moscow financial institutions in response to the invasion, some analysts say the country could further embrace cryptocurrencies as an alternative to the US-dominated global financial system.
Cryptocurrencies could help Russian companies bypass the big banks when making transactions. Countries subject to US sanctions including Iran and North Korea have used similar measures.
In 2020, Russia’s central bank told a Moscow newspaper that a blockchain-based version of the ruble could help reduce the country’s reliance on the US dollar and blunt the impact of US and European sanctions.