Geopolitical tensions clearly affect the cryptocurrency market, even though this market is considered, in principle, "decentralized." Here are the main ways in which this impact is manifested:
1. Increased volatility: During crises or military escalations, the volatility in the prices of cryptocurrencies like Bitcoin and Ethereum increases, as investors either turn to them as an alternative safe haven or withdraw from them for fear of sudden collapses.
2. Shift in investor behavior: Some investors view cryptocurrencies as "digital gold," turning to them as a hedge against crises. Meanwhile, others see them as high-risk assets and avoid them during times of instability.
3. Impact on liquidity and flows: Sanctions or international restrictions may lead to difficulties in accessing traditional banks and financial systems, prompting some to use cryptocurrencies to transfer or protect funds.
4. Amplification of the role of stablecoins: In times of uncertainty, traders prefer to shift from volatile cryptocurrencies to stablecoins like USDT and USDC to protect their capital.
5. Regulatory responses: Any significant political event may prompt governments to accelerate or delay legislation related to crypto, negatively affecting the market.
And positively.
