Bitcoin Should Tame the Geopolitical Tensions to Perform Well

The severity of the Russia and Ukraine conflict has resulted in Bitcoin losing its value altogether

In 2022, it is not just Bitcoin that is unstable. The economic changes and geopolitical tensions across the globe are getting extremely intense. However, many of you might've wondered if they have any connection. Yes, they do. Whenever a geopolitical conflict escalates, it has a direct impact on Bitcoin's price. Over time, the severity of the impact has gained a strong ground, resulting in BTC losing its value altogether.

Recently, the tension between Russia and Ukraine has worsened. Owing to the increasing uncertainty and the economic impacts, the United States is expected to hike the interest rates by 50 basis points, or 0.5% points, in March. Although Bitcoin tends to perform well when there is growing uncertainty, some of the tensions result in a different scenario. In the past, whenever a conflict between two countries broke out, it resulted in heavy use of BTC and intensified transactions. But this time around, the largest cryptocurrency by market capitalization, has been trading like equities. Even before the Russian invasion of Ukraine, Bitcoin's price was down the hill. After reaching a record high of US$69,000 in November 2021, BTC lost almost 40% of its value. It also began 2022 on a bearish trend, indicating no signs of recovery for the past two months. As the geopolitical conflicts across the world take a steep turn, it is questioning the whole infrastructure of Bitcoin.

From the ground up, Bitcoin is a decentralized medium that was designed to not fall victim to global happenings. But the recent market changes and global politics have started playing an important role in Bitcoin's price.

Recent Geopolitical Escalations and its Impact on Bitcoin

Russia and Ukraine Tensions: The situation between Russia and Ukraine has not just put global countries on the edge. It seems like Bitcoin's price has also been staying tense since the Russian invasion into Ukraine was brought to light. While Bitcoin price fell below US$40,000 last week, other cryptocurrencies like Ethereum, BNB, Solana, Cardano, and XRP also experienced declines. The cryptocurrency market lost over US$200 billion recently. Amid the ongoing tensions, US president Joe Biden's statement on 'Russia could invade Ukraine in a matter of days' came as a major blow to Bitcoin investors. This has put BTC in a far worse volatile situation.

Kazakhstan's Internet Crackdown: By simply shutting down the internet for five days straight, Kazakhstan has proved that the country can completely jeopardize the Bitcoin movement. After facing violent public protest against its regime, Kazakhstan's government imposed an internet ban to suppress communication between protestors across its wide territory. Despite succeeding in the political outlook, Kazakhstan has managed to say no to BTC for five days. Now the country's tech companies that have been running 18% of the global Bitcoin mining capacity, are looking for alternative locations.

China's Crackdown on Cryptocurrencies: Although this happened almost a year back, it still has lingering connections with the current Bitcoin price fall. To begin with, China was the biggest Bitcoin mining epicenter in the world. Owing to the increasing electricity usage and the decentralization BTC has caused, China came down very hard on the whole cryptocurrency market. At a point, the country imposed a blanket ban on cryptocurrencies, meaning everything starting from mining to trading will be barred. It made the market fall down a cliff at the time. After the ban, miners started Chinese miners started pirating into nearby countries where cryptocurrencies were in usage.

When Taliban Took Over Afghanistan: Since the economic status of Afghanistan was on a void swing for years, the country's people found cryptocurrencies as a profit-making space. Starting from mining to buying and holding for profit, everything about Bitcoin went viral. However, when the Taliban took over Afghanistan, the people had no choice but to bury their hope. Many of the Bitcoin miners have also moved to other countries hoping to save their lives first.

The Global Changes have Made BTC Even More Volatile

The increasing uncertainty in political and social matters across the globe has made Bitcoin a 'risky asset'. Currently, BTC has joined the list of stocks, commodities, high-yield bonds, currencies that are considered risky assets because of their unpredictable ups and downs. According to experts, 50% of Bitcoin price fall is happening because of the Federal Reserve's increased interest rates and the fear over the Omicron variant. We also have geopolitical tensions contributing greatly to BTC's price drop.