FTX CEO explains why Bitcoin dropped to $34K after the Ukraine crisis

The cryptocurrency and stock markets plunged after Russia invaded Ukraine. The global financial markets also recorded a sharp decline. The only product that gained during the day was crude oil that climbed to an eight-year high past $100.

Crypto markets plunge

Strong bears rocked the crypto market on Thursday. The market recorded an over $500 billion liquidation following this plunge. The global crypto market cap dropped by around 10% below $1.5 trillion.

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Bitcoin is usually deemed a hedge against inflation, and with anxiety growing across financial markets, many expected its price to hold and even gain. However, the reverse happened, but according to the CEO of FTX, Sam Bankman-Fried, the dip was not surprising.

In a Twitter thread, the FTX CEO said that the Russia-Ukraine crisis had resulted in a selloff in the traditional and crypto market. The price of Bitcoin has increasingly become correlated to the S&P 500 and NASDAQ movements.

4) It makes sense that stocks are down. War is, generally, bad.

What should BTC be doing here?

Well, on the one hand, if the world gets shittier, people have less free cash.

Basically, selling BTC–along with stocks, etc.–to pay for war.

— SBF (@SBF_FTX) February 24, 2022

Bitcoin’s demand could grow

Bankman-Fried further noted that Europe would most likely be affected by a currency destabilization. As such, the Ukraine invasion would create demand for alternative ways for people to store their wealth, and Bitcoin would be among the obvious choices.

The CEO also said that the crypto market comprises two types of investors: fundamental and algorithmic investors. The fundamental investor made decisions based on their sentiments about the entire market, while an algorithmic investor relied on data.

The fundamental investor will buy when the market drops because they will seize an opportunity. However, because of the growing correlation between Bitcoin and the stock market, and algorithmic investor will sell during an international crisis. The two factions will cause a push and pull effect in Bitcoin’s price movement. According to Bankman-Fried, this action has resulted in Bitcoin’s behaviour dipping 8% after Russia invaded Ukraine.

Bitcoin is currently showing signs of a strong recovery. The coin has gained by over 8% during the past 24 hours to trade at $38,427 at the time of writing.