The world awoke to a “Red Sea” not limited to financial markets when Russia declared war on Ukraine early Thursday.

Traditional financial markets and the cryptocurrency market tumbled over the past week, falling rapidly early Thursday. Aside from the price of crude oil, which surged to an eight-year high above $100, many stocks fell more than 5%. .

The Russian invasion on Thursday sparked a $500 billion sell-off by bears in the crypto market. Accordingly, the majority of coins lost key support and traded at 3-month lows. The crypto market cap is down 10% below the $1.5 trillion mark during the early morning trading session in Asia.

Bitcoin is viewed as a hedge against inflation and many expect its price to show resilience in times of crisis. However, CEO Sam Bankman-Fried of global spot and futures exchange FTX believes BTC’s drop comes as no surprise.

Sam Bankman Fried – Managing Director FTX

“It’s normal for stocks to fall. War in general is lousy. What should BTC do here? On the one hand, when the world gets worse, people will have less spare cash. Essentially selling BTC along with stocks…. to pay for the war,” Sam Bankman-Fried tweet.

In a Twitter thread related to the market scenario, Bankman-Fried said that the war caused a liquidity crisis in the market, leading to a sell-off in both traditional and crypto markets. The BTC price drop is also attributed to the growing correlation with the Nasdaq and the S&P 500, which have hit two-year highs.

Bitcoin Correlation with Traditional Markets | Source: Kaiko

Bankman-Fried noted the currency instability in Eastern Europe, suggesting that investors in Eastern Europe may be looking for alternatives due to Ukraine’s invasion, which could make BTC an obvious choice.

5) On the other hand, this is likely to destabilize Eastern European currencies.

And in general for the Eastern European financial systems.

Which means they may be looking for alternatives.

If you were in Ukraine right now, who would you trust with your money? pic.twitter.com/eRiaPeoiDr

— SBF (@SBF_FTX) February 24, 2022

“On the other hand, this could destabilize Eastern European currencies and Eastern European financial systems in general.

This means they may be looking for alternatives. If you were in Ukraine now, where would you put your money?

Bankman-Fried divided investor thinking into two categories: fundamental and algorithmic. Fundamental investors monitor market sentiment and sentiment, he explained, while algorithmic investors prefer data.

Market fundamentals point to buying opportunities as BTC provides a hedge against the crisis. Meanwhile, based on BTC data and correlation with the stock market, algorithmic investors favor selling.

According to this theory, the back and forth between fundamentalists and the algorithm has created a tug of war in the current bitcoin market.

“There’s push and pull where fundamental investors buy and algorithmic investors sell. On the net, BTC is fighting between them and is down 8% on the day,” Bankman-Fried tweet.

Bitcoin’s price showed signs of recovery as it surged above $35,663 from a daily low of $34,459.

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