As Russia Invades Ukraine, Bitcoin Plunges With Other Risk Assets

Is Bitcoin truly “digital gold” — or is it just another risk asset?

This key question continues to be put to the test as geopolitical events and economic headwinds put pressure on all risk assets.

The investment thesis that crypto, and especially Bitcoin, is a type of “digital gold” implies that crypto assets should perform well during “bad news” cycles. But recent headlines, including sky-high inflation prints, have seen Bitcoin’s price move directionally in tandem with stocks and other risk assets. Meanwhile, precious metals such as gold have weathered the storm with counter-cyclical gains.

The trend continued this week as Russia began its invasion of neighboring Ukraine; stocks and Bitcoin plunged, while gold strengthened.

So does all this mean that Bitcoin’s reputation as “digital gold” is now tarnished?

“Certainly crypto, including Bitcoin, is performing more and more like any other risk asset,” said Scott Hawksworth, co-founder of Cryptogic. “In 2022, there’s a lot more diversity in crypto investment theses. You still have some Bitcoin maximalists, but other investors buy into smart contract platforms or even NFTs for other reasons than to be an inflation hedge. And all these investors have very different mindsets,” said Scott.

As the crypto market continues to mature and amass assets, it’s clear that its appeal may be changing, but is nevertheless likely to endure. And Bitcoin may be no exception.

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Andy Hagans

Andy Hagans is the co-founder of Cryptogic and a recurring guest on its weekly show. He believes that early blockchain investments provide an asymmetric investment opportunity for enterprising investors.