Times of crisis fuel the cryptocurrency market
War continues to rage in Ukraine. Since the outbreak of the conflict, the prices of some digital currencies have been more stable than some experts expected. The need of people and companies for immediate payment assistance and monetary policy easing by the leading central banks caused a sharp rise.
It seems that times of crisis cannot harm cryptocurrencies, on the contrary: the enthusiasm for digital means of payment is still not decreasing. Compared to the previous year, the number of people owning cryptocurrencies increased by more than a third. One in ten people worldwide now own at least one cryptocurrency. And regulators are also watching the cryptocurrency markets with great interest. El Salvador, for example, declared bitcoin an official currency. Just this February, shortly before the outbreak of war, Ukraine also passed a new law legalizing cryptocurrencies. Digital currencies continue to play an important role in Ukraine. "Ukrainian and foreign companies will now be able to officially work with cryptocurrencies, open bank accounts or even offer their services to the population," explains Andrey Wolfsbein, Switzerland spokesman at investment company Freedom Finance. This is an international and internationally audited investment company with more than 340,000 clients that offers direct access to trading on the largest exchanges in American, European and Asian markets.
Despite times of crisis: The bitcoin has recovered
Although the prices of some digital currencies collapsed briefly at the end of February, a certain recovery can currently be observed. Since the outbreak of the conflict at the end of February, the price of Bitcoin has risen, and since then it has remained at a constant level. This is because with increasing global tensions, interest in investing in digital means of payment usually increases as well. People fear for their money in times of crisis and do not want to entrust it to a possibly unstable government. At the same time, trust in payment systems such as PayPal, Visa and Mastercard is declining. "Even if cryptocurrencies are not at an all-time high, bitcoin is holding up well right now," Wolfsbein says. That's because at more than $40,000 (as of April 13, 2022), the Bitcoin price remains above the psychologically important $40,000 mark. The prices of other well-known currencies such as Ethereum, Solana and Binance Coin also rose last month.
The crisis as a driving force
So the current war in Ukraine is not having too much of a negative impact on the cryptocurrency market, on the contrary. "In a geopolitical crisis, one of the main advantages of digital assets is that they enable a fast and, above all, global transfer of money," Wolfsbein provides an explanation for the growing interest in cryptocurrencies in times of crisis. As an example, he cites Turkey: "In 2021, inflation in Turkey reached an almost 20-year high of 36%. The national currency lost almost half of its value against the U.S. dollar. In contrast, the number of people owning cryptocurrencies doubled within a year. Almost every fifth internet user in Turkey now owns one." The fact that cryptocurrencies seem so attractive to many during crises is mainly due to their decentralized nature and fast payment and transfer options. In times of crisis, people like to take refuge in gold investments, but in the last month there has been a comparatively large amount of investment in digital currencies. This is not because crypto investments are safer than gold investments - they are still a high-risk investment product. It is much more likely that cryptocurrencies score points for their digital capabilities, which are clearly gaining relevance and are needed, especially in acute crisis situations. Nevertheless, Wolfsbein warns, "Crypto prices are not solely dependent on the current situation. Fundamental factors should not be forgotten now either. The Fed is raising interest rates and will continue to do so through the summer. In times like these, money is looking for risk-free investments."
Recognize trend changes
In times of crisis, people often tend to want to make investments quickly. The cryptocurrency market in particular is characterized by rapid price fluctuations, which is why it is advisable to analyze movements more closely before investing. A constant upward movement of the price and a steady accumulation of buy orders indicate that a trend change has either already taken place or is imminent. In addition, a trend change can be observed when the price of an asset fluctuates between highs and lows, Wolfsbein explains. Such events could be observed in mid-January and mid-March 2022. In addition to technical analysis, increasing activity in specific social media communities such as Twitter, Telegram or Reddit should also be taken into account to more accurately determine the price trend of individual cryptocurrencies. "Increased public interest in a topic or even news hype also indicate that the market will soon turn around. This should also be taken into account in the current situation," Wolfsbein said. Whether an investment in a cryptocurrency such as Bitcoin should be seen as an opportunity or a risk in an acute crisis is therefore also significantly dependent on whether and when a trend change seems imminent.
Source and further information: Freedom Finance
