First Mover Americas: Traders Prefer Gold, Fiat Safe Havens Over Bitcoin as Russia Goes to War

The latest moves in crypto markets in context for Feb. 24, 2022.

AccessTimeIconFeb 24, 2022 at 1:59 p.m. UTC
Updated May 11, 2023 at 6:00 p.m. UTC

Good morning, and welcome to First Mover, our daily newsletter putting the latest moves in crypto markets in context. Sign up here to get it in your inbox each weekday morning.

Here’s what’s happening this morning:

  • Market Moves: Bitcoin drops, gold rallies as Russia attacks Ukraine
  • Featured stories: Bitcoin risks deeper drawdown as traders prefer commodities and fiat safe havens amid Russia-Ukraine crisis.

And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9 a.m. U.S. Eastern time. Today's show will feature guests:

  • Michele Schneider, managing director, MarketGauge Group
  • Dan Hannum, chief operating officer, ZenLedger

Market Moves

By Omkar Godbole

Russia's decision to wage war on Ukraine has sent shockwaves through financial markets. While equities and bitcoin are down, gold, oil, base metals, agriculture commodities and currency market safe havens like the U.S. dollar and the Japanese yen are trading higher.

Broadly speaking, markets are displaying the usual unease with geopolitical tensions. Some in the crypto community, however, may be disgruntled to see the top cryptocurrency again missing a haven bid.

Crypto pundits have long hailed the top cryptocurrency as a better inflation hedge and haven asset than gold. But price action, particularly since the influx of institutions and sophisticated players in the market after the March 2020 crash, suggests otherwise.

The cryptocurrency has moved more or less in tandem with stocks. Data tracked by South Korea-based analytics firm CryptoQuant shows bitcoin's 60-day Pearson's correlation coefficient with the S&P 500, Wall Street's benchmark index, now stands at a record high of 0.56.

"BTC is getting adopted by traditional institutions," CryptoQuant said in a Telegram chat. "It's being owned by new players who trade stocks. Bad news: BTC is not a safe-haven asset. For now."

It's pretty clear institutional interest hasn't done for bitcoin what it was supposed to do, at least in the eyes of crypto investors – that is, establish the cryptocurrency as a digital safe haven better than gold.

The fact that fiat safe havens are doing better than bitcoin perhaps indicates that the cryptocurrency market as a whole is at the far end of the risk curve. Bitcoin was a largely uncorrelated asset before the COVID-19 crash and more so during the early bull cycles when institutional participation was almost nonexistent.

Bitcoin's daily chart. (Chart by Skew)
Bitcoin's daily chart. (Chart by Skew)

A continued risk-off might push bitcoin down to $30,000, which acted as a strong support zone in January 2021 and three months to July 2021. A potential break lower would confirm a double top breakdown on the weekly chart and invite more selling pressure.

Latest Headlines

Prolonged Risk-Off Ahead?

By Omkar Godbole

Observers say the asset price declines brought by Russia's misadventure may have legs.

"The problem is this [Russia-Ukraine crisis] is now coming at a very bad time for markets," Christian Mueller-Glissmann, managing director of portfolio strategy and asset allocation at Goldman Sachs International, told Bloomberg TV. "The only way risky assets can make progress if central banks are tightening policy aggressively is if you have growth narrative and now you are dealing with a growth shock, particularly for Europe, but pretty much globally."

Historically, the S&P 500 has delivered positive returns during most Fed tightening cycles, except the one seen in the early 1970s, when the U.S. economy grappled with stagflation – a situation in which an economy experiences a simultaneous increase in price pressures and stagnation in growth.

Russian President Vladimir Putin's war and the West's retaliatory sanctions on Russia, a major energy exporter, may exacerbate supply chain issues, bolstering inflation. The New York Fed's global supply-chain pressure index is at its highest since the 1990s, chart shared by The Daily Shot newsletter's Twitter handle shows. Brent crude oil has rallied above $100 for the first time since 2014.

"There is no doubt that inflationary pressures will arise from a surge in commodity prices. Russia and Ukraine remain some of the largest exporters of various precious metals and agriculture. The current conflict is bound to affect global prices," Matthew Dibb, chief operating officer and co-founder of Stack Funds, said.

Dibb added that the combination of war, supply constraints, booming commodity prices and zero rates is a textbook recipe for stagflation. While the crypto community still strongly considers bitcoin as a better store of value, past data shows the cryptocurrency is predominantly a risk-on inflation hedge, meaning it outperforms other assets when investors are willing to take risks.

The situation may not change anytime soon as traders are going for commodities or the so-called real-world assets in the wake of the Russia-Ukraine crisis. Regulators worldwide, including Ukraine's, continue to take an anti-crypto stance and the Fed is unlikely to walk back on plans to raise borrowing costs this year.

"We would hold shorts in most markets and consider long positions in precious metals. Maybe agro and commodities too," Laurent Kssis, a crypto exchange-traded fund (ETF) expert and director of CEC Capital, said in a Telegram chat.

Goldman Sachs is overweight commodities and precious metals. "You need to look at alternatives to protect the portfolio," Goldman's Glissmann told Bloomberg TV. "Raising cash is one way to reduce risk, but we have also looked at gold, safe haven FX and commodities broadly being a bit of a safe haven because they are at the center of this trouble."


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Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.

Bradley Keoun

Bradley Keoun is the managing editor of CoinDesk's Tech & Protocols team. He owns less than $1,000 each of several cryptocurrencies.