Crypto continues downward slide; helps Ukranians

As the conflict between Ukraine and Russia intensified, crypto prices continued their downward slide, following the patterns of global financial markets generally.

Bitcoin is currently trading around $38,000, having whipsawed last week to below $35,000. Meanwhile, ether is trading around $2,600, having fallen below $2,300 last week in volatile conditions.

This continues the recent trend of cryptoassets behaving like ‘risk-on assets’. BTC in particular has been mirroring US stocks to an unprecedented degree, meaning the downward trajectory on prices seen over the past few weeks is to be expected, based on the performance of the S&P 500.

In the current climate, it’s not surprising that many investors are looking to de-risk and valuations have been reflecting this. If the current tensions calm quickly, then we may see the appetite for risk return.

However, we still have high inflation, interest rate hikes and quantitative tightening talk ongoing, meaning that the market may need more clarity before prices really start moving to the upside again.

Ukrainians turn to cryptoassets under martial law

Following the Ukrainian government’s crackdown on digital money transfers, people are seemingly turning to cryptoassets. According to local data, domestic buyers were turning to Tether’s USDT stablecoin, pegged to the U.S. dollar. Tether, the most popular stablecoin, has remained relatively stable over recent weeks, unlike more high-profile cryptoassets such as bitcoin or ethereum.

Ukraine has been a supporter of digital assets, and in 2021 Ukrainian President Volodymyr Zelenskyy signed a law that paved the way for the country’s central bank to issue its own digital currency. In fact, the country was reportedly modernising its payments market so that its national bank would be able to issue digital currencies.

In the past few days, the demand for Tether and other tokens on the front line has been a sobering reminder of crypto’s significance, not just as an alternative when trust in fiat currencies and access to them is severely limited, but also as a tool for collective change.

Crypto crowdfunding helping Ukrainians

Indeed, it has also been reported that Ukrainian NGOs have seen inflows of donations via cryptoassets during the crisis. One donor in particular sent over $3million in bitcoin, as Ukrainians turn to crowdfunding their defence and taking reliance away from banks or traditional financial avenues to access funds.

According to Elliptic, more than 4,000 donations have been made thus far as volunteer groups and NGO advertise their crypto wallets online.

If nothing else, these developments demonstrate that crypto as an asset class isn’t simply reacting to the events as they unfold, but is directly linked to the demands on the ground, which may therefore result in heightened market sensitivity.

Institutional exposure to crypto

BNY Mellon is reportedly developing a digital asset custody platform, which would allow institutional customers to gain crypto exposure. BNY would allow customers to store the most popular assets in the bank’s crypto wallets to begin with; then, following regulatory approval, the service will expand and integrate further digital assets.

While it may not launch for a few more months yet, BNY looks like it wants to stay ahead of its institutional peers with this latest venture. This is perhaps not unexpected, considering it was one of the first institutions to offer crypto exposure to its clients, and clearly sees this as an offering which will generate considerable demand.

Likely to launch in the US first, once this offering does become live, we could see more institutional finance pour into the market – acting as a potentially galvanising factor in the months to come.

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