On August 15, Trump and Putin met as scheduled in Alaska. This meeting was not only a focal point of global politics but also caused a thrilling shock in the cryptocurrency market. #加密市场回调
On the day the news of the talks broke, cryptocurrency prices plummeted, but quickly rebounded in the following days. This incident undoubtedly brought the complex relationship between cryptocurrencies and geopolitical risks back into focus.
To understand the impact of this event on the market, we must first review how cryptocurrencies have gradually become involved in this unprecedented geopolitical conflict since the outbreak of the Russia-Ukraine war. The two starkly different perceptions of cryptocurrencies in the market have led to significant divergence, resulting in substantial volatility.
At the beginning of the war: The Contradiction Between Safe-Haven Myths and Risk Assets
On February 24, 2022, Russia launched military operations against Ukraine, plunging global markets into panic.
Bitcoin, as the largest cryptocurrency by market capitalization, saw its price drop immediately on that day.
Interestingly, after the initial plunge, Bitcoin prices quickly rebounded and even outperformed the stock market during certain periods. This abnormal performance reignited the view that 'Bitcoin is digital gold, a safe-haven asset in chaotic times.'
Proponents of Safe-Haven Assets argue that in the face of a collapsing traditional financial system or risks of sanctions, decentralized, borderless, and censorship-resistant cryptocurrencies can provide investors with a safe haven.
The Russia-Ukraine war provides partial evidence for this viewpoint:
Ukraine Initiates Donations: After the outbreak of the war, the Ukrainian government and NGOs quickly raised funds through cryptocurrencies. They published official Bitcoin and Ethereum addresses and received over $100 million in donations within just a few weeks. The efficiency, transparency, and low cost of cryptocurrencies made them the fastest and most direct channel for international aid, perfectly avoiding the delays and disruptions that traditional financial systems may face during wartime.
Russia's Evasion of Sanctions: As Western countries impose unprecedented financial sanctions on Russia, including removing its major banks from the SWIFT system, cryptocurrencies are seen as potential tools for Russia to evade sanctions. Although large-scale sanctions evasion has not been confirmed, the Russian authorities' move to legalize cryptocurrency for international trade settlements undoubtedly supports its strategic value as an alternative to traditional financial systems.
However, a harsher reality soon proved that the 'safe-haven' attribute of cryptocurrencies is fragile on a macro level. As the Federal Reserve began its rate hike cycle to combat inflation, the performance of the cryptocurrency market showed a high positive correlation with U.S. stocks, particularly tech stocks.
It did not exhibit independent safe-haven value like gold or the U.S. dollar during risk events; instead, it acted more like an amplifier of high-risk assets. When market confidence wavers, it often declines more severely than traditional risk assets.
Thus, the impact of the Russia-Ukraine war on the cryptocurrency market can be summarized as a beginning full of contradictions: it demonstrated its unique value on a micro level (such as individual donations and evading sanctions), but on a macro level, it once again exposed its nature as a risk asset.
Key Moments: Timeline of Market Performance
In addition to the chaos at the beginning of the war, some key moments in the Russia-Ukraine conflict also provide us with a valuable window to observe the cryptocurrency market.
Comprehensive Sanctions on Russia (March 2022): As the U.S. and its allies announced comprehensive sanctions, including freezing the assets of the Russian central bank, the market's view on cryptocurrencies became divided. Some believed that Russia would move funds into cryptocurrencies to evade sanctions, providing some price support in the short term; others feared that sanctions might extend to the cryptocurrency sector, thereby impacting the market. Ultimately, the market reflected more concerns about macro risks, entering a downward fluctuation.
Destruction of the Nord Stream Pipeline and Ukraine's Counterattack: Although these events triggered significant waves in global politics and the energy market, their impact on the cryptocurrency market was surprisingly small, or even negligible. Our research indicates that the market did not react clearly to these specific military or geopolitical events. This may suggest that after the war entered a stalemate phase, the cryptocurrency market had absorbed most of the macro risks and was primarily influenced by factors such as the Federal Reserve's monetary policy and macroeconomic data.
These events indicate that the cryptocurrency market's response to geopolitical risks is not linear. It may react strongly to sudden events at the beginning of a war, but over time, its performance is more linked to global macroeconomic conditions and financial policies.
Trump-Putin Meeting: Why Did Bitcoin Prices Fluctuate?
Now, let us return to the present: Why did the Trump-Putin meeting in Alaska cause Bitcoin prices to fluctuate?
This meeting took place against a unique market backdrop. Under Trump’s leadership, the U.S. government demonstrated an unprecedented pro-cryptocurrency stance and pushed forward a series of policies supporting cryptocurrency development, even proposing the establishment of a 'national strategic reserve.' This positive policy expectation is one of the important drivers of the current bull market.
However, when Trump and Putin engaged in dialogue, market sentiment became complicated. The volatility of Bitcoin prices is attributed to several reasons:
The classic script of 'buy the expectation, sell the fact': Prior to the meeting, the market generally expected Trump to leverage his unique diplomatic skills to bring some form of peace progress to the Russia-Ukraine conflict. This optimistic sentiment drove prices up. However, when the meeting concluded and investors found that the talks did not immediately result in a substantive peace agreement, the previous optimistic expectations fell through, leading to profit-taking and subsequent price declines.
Shift in Risk Appetite: Easing geopolitical tensions put pressure on traditional safe-haven assets (such as gold and the U.S. dollar), but typically benefits risk assets (such as stocks and cryptocurrencies). However, the uncertainty surrounding the Trump-Putin talks kept the market in a 'risk uncertainty' state. Some investors worried that the talks might trigger new surprises and adopted risk-averse strategies, selling off risk assets including Bitcoin.
Information Asymmetry and Short-term Speculation: In highly scrutinized political events, market information is filled with noise and speculation. Some short-term speculators engage in high-frequency trading based on any movements during the talks, amplifying price volatility. For instance, when reports indicated that Trump and Putin had a private phone conversation, the market experienced a rapid drop.
In summary, this meeting reflects the maturity of the cryptocurrency market at this stage. It is no longer merely a simple response to macro risks but a comprehensive reflection of multiple factors including geopolitical events, policy expectations, and market sentiment.
War and Peace, Will the Bull Market Come to an End?
Finally, let us explore a more forward-looking question: If Russia and Ukraine reach a peace agreement, or if the conflict escalates again, what impact will it have on the current bull market driven by positive policies and market enthusiasm?
If a peace agreement is reached:
Peace agreements are often seen as catalysts for a rebound in global risk appetite. Theoretically, this means the global economy will enter a more stable period, which would benefit risk assets, including cryptocurrencies.
Positive Impact: Decreased risk premiums and increased investor confidence. A large amount of safe-haven capital may flow out of traditional safe-haven assets like the U.S. dollar and government bonds, seeking high-yield risk assets. Cryptocurrencies, as representatives of high yield, may benefit from this and further drive the bull market.
Potential Challenges: However, a peace agreement may also mean a cooling off of the geopolitical risk 'hotspot,' leading to some hedging funds flowing out of cryptocurrencies. Additionally, if peace comes alongside a strong global economic recovery, the Federal Reserve may adopt more aggressive monetary tightening policies to control inflation, which would put long-term pressure on the cryptocurrency market.
If conflicts escalate again:
If peace negotiations fail and conflicts escalate again, the implications will be even more complex.
Short-term Impact: The market may fall into panic again, leading to a sharp decline in cryptocurrency prices in the short term. This would resemble the situation at the beginning of the war, where investors would prioritize selling risk assets to seek self-protection.
Long-term Impact: In the long run, escalating conflicts will continue to drive inflation higher, forcing central banks to maintain tightening policies, which is undoubtedly the number one enemy of the bull market. Moreover, if geopolitical risks lead to a global economic recession, the performance of cryptocurrencies as risk assets will be highly correlated with the broader market and may not escape unscathed.
The impact of the Russia-Ukraine war on the cryptocurrency market fundamentally reveals a fact: cryptocurrencies are not an isolated financial world. Their performance is closely linked to global macroeconomics, monetary policy, geopolitical risks, and investor sentiment. While the war provides a venue for cryptocurrencies as alternative financial tools, their nature as an emerging, highly volatile risk asset still makes it difficult to escape the constraints of traditional financial markets on a macro level.
The current bull market is primarily driven by positive signals at the political level in the U.S. and market expectations for a new wave of institutional investments. The fluctuations in geopolitical conditions, whether peace or escalation, are merely variables that influence market sentiment and capital flows, rather than decisive fundamental forces.
Therefore, the meeting between Trump and Putin, along with the future evolution of the Russia-Ukraine situation, will bring fluctuations to the market in the short term. However, to end the bull market driven by policies, technological innovations, and market sentiment, simply relying on geopolitical shocks may not suffice. As long as the positive fundamentals of cryptocurrencies and the loose macroeconomic expectations remain unchanged, the journey of this bull market will not easily come to a halt. $BTC $ETH
