- Bitcoin experienced its biggest daily buying volume for six months yesterday
- Price reversed following fears over the Russian invasion of Ukraine
- The Federal Reserve may now not raise interest rates as a result
Bitcoin experienced its biggest daily buying volume since the reversal in July last year as global events and their wider ramifications caused a return of optimism to the cryptocurrency. Fears over a Russian invasion of Ukraine had pushed the Bitcoin price down in the short term, while longer term fears over the Federal Reserve raising interest rates and engaging in quantitative tightening had cast a shadow over Bitcoin’s potential performance in 2022. However, with one event having now taken place and possibly eradicated the other, it’s no surprise that Bitcoin is reacting favorably.
Bitcoin Reverses as Fears Turn to Reality
News that Russia had invaded Ukraine sent traditional and digital markets spiralling further into the red yesterday, leading to Bitcoin dropping to $34,500. This reversal was short-lived however as price recovered over the rest of the day in a classic case of fear of the event being worse for price than the event itself.
Gold meanwhile, which had been rocketing in advance of the threatened invasion, did the opposite and endured a swift reversal as investors turned back to risk-on assets.
World Events Could Cause Fed to Backtrack
As Bitcoin’s price slowly recovered over the day, commentators intimated that the possibility of escalating conflict with Russia would lead the to the Federal Reserve reneging on its plans to hike interest rates and press ahead with quantitative tightening:
Important note: war is horrible and watching the invasion live through twitter is sickening.
This doesn’t change that…highlighting because it’s one of the more important factors of how well Bitcoin performs this year.
— Luke Martin (@VentureCoinist) February 24, 2022
As we have outlined in the past, this twin scenario would be very bad news for Bitcoin, so the fact that both levers will likely now not be pulled, at least in combination, momentum swings back in Bitcoin’s favor, suggesting that 2022 might, for all the worst reasons, be a better year than expected.
