As Ukraine Crisis Underscores Bitcoin as Risk Asset, Volatility May Be Here To Stay

Cryptocurrencies have largely traded in tandem with US stocks as of late

article-image

Ukrainian army | Source: Shutterstock

share

key takeaways

  • Bitcoin and ether both plunged more than 10% on Thursday before recovering to notch modest 24-hour gains
  • Crypto funding behind the conflict raises the possibility of quicker regulation, industry participants say

While the crisis in Ukraine roils global equity and digital asset markets, bitcoin and other cryptocurrencies are increasingly seen as risk assets in the eyes of institutional traders.

Recent shocks have hindered the premise of bitcoin as digital gold, or a store of value — its standing as a bellwether investment in times of turmoil has likewise been called into question.

Bitcoin and other cryptocurrencies, including ether, plunged more than 10% Thursday as the Russian incursion into Ukraine started, before bouncing back to book modest gains on the day. Digital assets also continued to rise Friday as traders appeared to shake off the impact of medium- and longer-term implications of the invasion.

Kevin Kang, co-founder of digital asset hedge fund firm BKCoin Capital, attributed the recovery to “short covering and equities recovering earlier losses.”

Indeed, bitcoin has traded in near tandem with stocks as of late. Wary of the correlation, big-time traders have largely stayed on the sidelines of the latest market moves, according to Rance Masheck, CEO of trading platform iVest Plus.

“Overall, [crypto] moved with the way the US market moved,” Masheck said. “Some of it came back, just like the market came back, but the big players aren’t jumping in or bailing out.”

iVest data show a decline of about 50% in bitcoin trades over $100,000 from the same time last week — plus, the firm recorded a net outflow of a modest $19 million, indicating few directional bets. 

Bitcoin was up 9.6% in the last 24 hours as of midday Friday, while showing a weekly decline of -2.9%. Ether, meanwhile, increased 10.7% in the last day, paring week-long losses to -5.6%. 

Volatility shows few signs of slowing.

“Historically, the day of the invasion marked a local bottom in the market as uncertainty dissipates, but there are a lot of talks about how Russia may be just starting and may go into Poland and other near NATO nations, which will put the US in a limbo,” Kang said. “There are still a lot of uncertainties in the market. We expect the volatility to continue.” 

Brian Brooks, CEO of bitcoin mining and crypto technology company Bitfury, said bitcoin is trading as it should in a risk-off environment where investors “are going to retreat to Treasurys and cash for a short period of time.”

Other macro factors are at play behind recent market volatility, too, he said — including looming tax bills on the horizon that traders may not have budgeted for. A recent drying up of liquidity hasn’t necessarily helped matters either.

“Even though bitcoin in part has an element of store of value to it, it’s still thinly traded enough that it’s acting more like a risk asset,” Brooks said. “Other than bitcoin, the right way to think about crypto tokens is they’re risky internet stocks — and internet stocks are way down.”

Meanwhile, the growing prospect of rising interest rates in the US — expected as a means to tamp down runaway inflation — is likewise weighing on crypto markets, according to David Tawil, president of cryptocurrency hedge fund firm ProChain Capital. Ongoing supply chain jams are also roiling traditional financial instruments and digital assets, Tawil said.

“Clearly, the downdraft in the asset class has been because the dominant feature has been, essentially, a growth-tech story, a risk-on asset,” Tawil said. “Therefore, when we get into a risk-off environment, it’s going to trade down, including inflation, rising rates and now geopolitical instability.”

The Ukraine tensions also raise the possibility of sanctioned Russian oligarchs turning to crypto to transfer money as banks have cut them off, Masheck said — as well as the government itself tapping digital assets to circumvent traditional finance. It heightens the prospect of US regulators taking a faster pace as both Ukraine and Russia have moved to legalize and regulate the space.

“Obviously, those sanctions will have some level of impact, but crypto allows for a little bit of a circumvention of some of that,” he said.

Masheck and Brooks both expect bitcoin to behave less like a risk asset and lose its correlation to stocks as the asset evolves.

“As we move forward here, I think we’ll start to see more of a divergence between what US markets are doing and what’s happening in crypto,” Masheck said.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (10).png

Research

Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

/

article-image

New L1 chain tackles TON’s lack of native EVM support, promising Ethereum app compatibility

article-image

Bitwise CEO Hunter Horsley tells Blockworks that it tapped a third party to provide the reports

article-image

If pump.fun is a success, NYSE may have to return to a six-day workweek

article-image

One wallet bought pump.fun’s token from 500 different addresses

article-image

Asset allocator says fee compression could be a challenge as Grayscale converts more crypto funds to ETFs

article-image

The Stripe-acquired firm has big plans for a streamlined, multi-wallet future