The Ukraine crisis is affecting cryptocurrency very interestingly.
Bitcoin jumped as much as 16% on Tuesday, continuing its sharp rebound as the Russian and Ukrainian forces continue fighting and the U.S. serves up sanctions.
The cryptocurrency was last up 6% in the previous 24 hours to $44,219.50, according to Coin Metrics. That rally comes after cryptocurrency prices plunged last week as risk assets such as stocks sold off following Russia’s invasion of Ukraine.
Ether jumped 5.4% to $2,980.38. Earlier in the day the crypto asset rose above $3,000.
However, January was a turbulent month for the crypto space as market participants saw a broad sell-off. Continued uncertainty about the proposed U.S. Fed rate hikes in March and the conflict in Ukraine/Russia plagued the market for most of February, though prices rebounded at the month’s end.
On-chain metrics such as exchange net flows show that BTC and ETH posted net inflows in February, increasing their marketable supply. This signals that market participants may be moving their BTC and ETH out of cold storage to potentially trade them on exchange platforms.
However, while BTC’s bearish momentum ostensibly fades, the opposite is true for ETH.
According to several on-chain indicators, sentiment is bearish for BTC and potentially bullish for ETH at the moment. Specifically, BTC’s Spent Out Profit Ratio (SOPR) indicates that market participants are selling BTC at a loss and ETH’s Market Value to Realized Value (MVRV) Z-Score suggests that it was oversold in February.
Since Thursday, when the invasion by Russia began, transactions on centralized bitcoin exchanges in both the Russian ruble and the Ukrainian Hryvnia surged to their highest levels in months, according to Kaiko data.
Clara Medalie, research director at crypto data provider Kaiko, noted that ruble-denominated volume for the stablecoin Tether is more than twice as high as bitcoin volume, which she said suggests stablecoins could play a more important role as a safe haven asset or in circumventing sanctions.
“Most dollar-pegged stablecoins such as Tether or USDC are issued by centralized companies that could be targeted by sanctions, which could force them to monitor transactions,” she said. “There is precedent to cenralized stablecoin issuers ‘blacklisting’ certain addresses, so it will be interesting to see how the role of stablecoins evolves throughout the crisis.”
Rinko said the conflict in Ukraine isn’t the reason for crypto’s outperformance in the market this week. Instead, investors are pricing out Federal Reserve rate hikes, he said.