Following Russia’s invasion of Ukraine, crypto markets have been somewhat resilient, but given the shock to the broader global financial system, Coinbase stated in research on Thursday that it will be tough to maintain current performance.
According to the head of institutional research, David Duong, the primary performance drivers for the crypto markets have gotten “more entangled” in February, as the rise of global tensions has produced greater uncertainty about the likely normalisation path to be taken by the US Federal Reserve (Fed).
The Coinbase report focussed on the following points:
- De-risking in the months leading up to the attack, as well as the quick escalation of the Ukraine crisis, resulted in enormous liquidations, forcing crypto markets to bottom out sooner than predicted.
- This, combined with the assumption that the beginnings of large-scale conflicts are often purchasing opportunities, and the expectation that the conflict would be short-lived, have all contributed to the resilience.
- These occurrences may have persuaded investors that global central banks will proceed with interest rate hikes more cautiously.
- Prior to the invasion, investors expected a faster recovery, but they will likely require more certainty on the date of peak inflation and the Fed’s rate hike cycle before committing additional capital.
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