Cryptocurrencies continued to pull away from stocks as the intensifying war in Ukraine prompts investors to look for safe havens.
Bitcoin advanced as much as 2% to $44,767 in early trading in Hong Kong before giving up some gains. It has jumped 18% over the past three days—a period during which President Vladimir Putin stepped up shelling of Ukrainian cities and other nations responded with additional sanctions against Russia. The MSCI AC World Index has fallen in nine of the past 10 sessions, including the last three.
“This geopolitical environment is certainly a tailwind for crypto,” said Jonathan Cheesman, head of over-the-counter and institutional sales at crypto-derivatives exchange FTX, in a note Tuesday. “This situation highlights the use case for a decentralized, neutral, algorithmic safe haven.”
The Bloomberg Galaxy Crypto Index rose 4.5% on Tuesday, the fifth straight day of gains. Ether was up 17% to $3,004 at 5:50 p.m. in Hong Kong on Wednesday.
Bitcoin proponents have for years touted its virtues as a hedge against conflict and inflation, citing its borderless nature and fixed supply. That image was dented by a crypto rout that started in November and sent bitcoin tumbling as much as 52% amid concerns about central bank tightening. Other so-called alt-coins suffered even steeper declines.
But the past few days of broad gains in digital tokens have kindled the notion that, at least, they offer protection from governments that can seize other types of assets, as some have recently vowed to do to Russian oligarcs.
It’s “fascinating that, after a week into geopolitical uncertainty, bitcoin is outperforming gold, which is known as a safe-haven asset,” said Marcus Sotiriou, an analyst at U.K.-based digital asset broker GlobalBlock. Gold slipped 0.2% on Wednesday after rallying since late January.
As evidence mounts of a crypto rebound, retail investors appear to be piling in. Most of the accumulation in bitcoin over the last week came from smaller investors, according to data from Glassnode. The researcher cited significant buying increases in wallets with less than 1,000 bitcoins—with those with less than one bitcoin being the most aggressive.
Noelle Acheson, head of markets insight at Genesis Trading, said that while this metric can be unreliable as large holders spread their holdings over multiple wallets, it may hint at who’s driving bitcoin’s recent rally.
“This does not necessarily mean that retail is piling in, but it does hint that retail investors, who have largely stayed away for at least the past year, are coming back and bringing new investors with them,” Acheson said in a tweet. “The case for accumulation seems to have acquired a large group of new believers.”
—With assistance from Emily Nicolle.
This article was provided by Bloomberg News.