The clouds of war stoke massive crypto volatility, but the mood is optimistic!


It's cryptocurrency volatility time again!

The year 2021 was a bumper year for at least five of the most popular cryptocurrencies, with Bitcoin having led the upward and downward surges like never before.

There were some milestone events which were so pivotal that they are likely to be remembered as part of the history of the development and rise to popularity of cryptocurrency, including Elon Musk's infamous tweet in May which cleverly elevated his status as a digital currency influencer and allowed him and millions of others to cash in by crashing the value of five popular coins, and then using the same method of influential media to move the price up again.

Analysts within major banks began to look closely at Bitcoin and Ethereum, and instead of shying away from these asset classes and writing them off as unbacked and extremely volatile, the learned mathematicians within the ultra-conservative Tier 1 banks quite simply observed the rises and falls, and predicted that there may well be a six-figure value for Bitcoin in the near future.

This perspective represented a sea change for Bitcoin, as it no longer is seen as an outlier or the preserve of mavericks and anti-bank and anti-establishment rebels, but is viewed as a  genuine asset class of the future and a worthy store of value. A digital commodity, so to speak.

As this rollercoaster was in full swing, Ethereum also grabbed the attention of those with the clever money as well as the banks, but for different reasons.

Ethereum's smart contract capable blockchain technology has become viewed as a major instrument in the future of finance, with its ability to distribute across a blockchain network transactions which would ordinarily be carried out by an intermediary. HSBC and Wells Fargo both broke the mold recently by adopting blockchain technology to bypass CLS Bank when settling FX transactions at interbank level. Who'd ever have thought that would happen?

Now, another price-moving factor has come about, this time it is more sinister. The possibility of war.

Throughout history, unrest and war has influenced economic circumstances. Political changes such as the instigation of a totalitarian state, or emergence from a planned economy into a market economy such as the downfall of the Soviet Union thirty years ago in which a huge part of the world suddenly became open to the world market.

This time, it may be taking place on the same territory as the opening up of the free market thirty years ago, but it is not something to celebrate at all.

A possible war between Russia and Ukraine, involving other nations which are beginning to tool up to participate, has made massive waves in the markets, and in particular the cryptocurrency market.

Bitcoin dropped by 9% yesterday as a result of the continual news relating to a possible war.

That represents a 6 month low for the major cryptocurrency, which was trading on Monday, January 24 at $33,058, a stark contrast to its all-time high of $69,000 just two months ago in November.

That is almost a cut in half for Bitcoin.

The interesting situation around this week's price crash however is that the exact same view is being taken as that which surrounded the price crash in May following Elon Musk's tweet, that being that people are buying in.

There is a theory that when a war approaches, especially one of sizeable political importance on the world stage, people buy 'at the first bullet' because it is common for popular markets to fall around the beginning of geopolitical unrest or conflict.

This is a view that is being echoed across the notice boards of the internet worldwide.

It will be very interesting to see which way Bitcoin and some of the more popular Altcoins go during this period of instability, especially given that the sovereign fiat currencies of the two nations at the core of this possible conflict are notoriously volatile and do not benefit from much confidence among residents of either nation.

Isn't that what Bitcoin was designed for?

FXOpen offers the world's most popular cryptocurrency CFDs*, including Bitcoin and Ethereum. Floating spreads, 1:2 leverage — at your service. Open your trading account now or learn more about crypto CFD trading with FXOpen.

*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules respectively. They are not available for trading by Retail clients.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Financial Market News

Weekly Market Wrap With Gary Thomson: S&P500, US Dollar, Gold Price, PEP Stocks Weekly Market Wrap With Gary Thomson: UK100, Hang Seng Index, AUD/JPY, GBP/USD, USD/CAD Japanese Yen Goes on Volatility Drive after US Economic Uncertainty Surfaces Weekly Market Wrap With Gary Thomson: FTSE100, US Dollar, USD/JPY, BTC/USD Weekly Market Wrap With Gary Thomson: UK100, USD, GOLD, OIL

Latest articles


Tech Stocks Back in Vogue as Nasdaq 100 Rallies to Record High

The tech-heavy Nasdaq 100 index (US Tech 100 mini on FXOpen’s TickTrader platform) reached a new all-time high on Monday, closing the trading session at 18,684.2 according to FXOpen pricing, fueled by renewed investor enthusiasm for technology


Gold Price Reaches Historic High

According to confirmed information, Iranian President Ebrahim Raisi, considered a potential successor to the country's supreme leader, Ayatollah Ali Khamenei, died in a helicopter crash in a mountainous area near the border with Azerbaijan. The helicopter also carried Foreign Minister

Forex Analysis

Commodity Currencies Retreat from Local Highs

Despite the cooling labour market in the US and declining inflation, the American currency continues to move towards new highs. For instance, the USD/JPY currency pair might update the current month's high at 156.70, the NZD/USD sharply

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.