All about Bitcoin’s reaction after Russia “declared” war on Ukraine
As tensions escalated on the Russian-Ukrainian border in the early hours of Thursday, major asset classes around the world fell, including cryptocurrencies. The situation is looking bleak given ground images in Ukraine showing explosions in the capitals of Kiev and Kharkiv.
In fact, it was the Minister of Foreign Affairs of Ukraine explain Russia carried out a “full-scale invasion” of the country.
Other observers have also begun to refer to the conflict as a “war”.
According to CoinMarketCap, the global crypto market is currently down more than 9% over the past day. For example, Bitcoin is down over 9% at press time.
Technically, Bitcoin has fallen below a key support level due to the current conflict. It is currently trading below the 50 and 200 moving averages, which will also act as hard resistance.
However, at the time of writing, the RSI is below 30 and in the oversold territory. For some, this means the leading cryptocurrency is about to reverse.
BTC/USDT | Source: TradingView
Bitcoin’s volatility also surged amid this FUD, with a reading of more than 80%. The increased volatility in the market will eventually lead to increased potential volatility (IV) and mass liquidation of long positions in both options and futures.
Bitcoin Volatility Index (BVIN) | Source: Glassnode
The volume of net bitcoin flows through the exchange also increased dramatically. Especially as more and more investors and traders are trying to exit their positions to wait for the situation to calm down.
Bitcoin inflow volume through exchanges | Source: Glassnode
The Bitcoin network real profit/loss indicator also slipped above -$320 million in a matter of hours – showing mass profit-taking across all exchanges. This correlates closely with the two metrics above.
Real Bitcoin Network Gain/Loss | Source: Santiment
Data from Glassnode also shows that the funding rate is turning positive. Accordingly, holders of long positions in bitcoin futures contracts pay less in the long run and are profitable. If this continues for an extended period, these long positions could be forced to liquidate their losses and exit the market to cut losses.
The mass liquidation of longs will immediately push the futures market lower and lead to a catastrophic bear cycle.
However, not everything looks bad. Certain metrics also appear to suggest that Bitcoin has an attractive valuation to “buy the dip.” For example, DAA – corrected divergence that flashed big buy signals everywhere.
Correction of DAA price divergence | Source: Santiment
Additionally, the recent drop has resulted in many protracted liquidations in the market. However, on closer inspection Data from Coinglass.com shows that this is not having too much of an impact. Only $233 million in Bitcoin was liquidated today, which is very little compared to the January 21, 2022 and December 4, 2021 liquidations. On those days, $987 million and $1.58 billion were liquidated respectively.
Liquidation of Bitcoin | Source: Coinglass.com
To sum up, while the situation in the crypto market so far is scary, it doesn’t look too bad. The easing on the Russian-Ukrainian border could bring renewed optimism to Bitcoin and the crypto market.
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