Bitcoin crashes as claims of safe haven blown to bits by Russia's invasion of Ukraine

Bitcoin's (BTC-USD) price plummeted on Thursday as global markets reacted with alarm to Russia's invasion of Ukraine. It tumbled to its lowest level in a month, crashing as much as 10% to $34,046 (£25,403), as Kyiv faced missile attacks and its airport was reportedly captured by Russian troops.

Bitcoin's fall diminished its market value by 8% to $665bn in the last 24 hours, according to data from CoinMarketCap, dealing a severe blow to claims that the cryptocurrency is 'digital gold' and a safe haven.

Experts say bitcoin is behaving as a risk asset at the moment, but this is likely to be temporary.

The founder and CEO of independent financial advisory firm DeVere Group, Nigel Green said: "Bitcoin has taken a hit, in tandem with the stock market which also drops during more volatile periods. It is currently being regarded as a risk asset, alongside equities."

He added bitcoin might "revert" to being regarded as a safe haven asset as the situation in Ukraine develops. "Its unconfiscatable – which could become extremely important as centralised authorities take drastic steps.”

Bitcoin is currently down 6% to $36,173 on Thursday afternoon in London.

Farah Mourad, senior market analyst at currency and cypto trader XTB MENA region, said: "The Russian market remains an important component of the crypto sector. Additionally, cryptos are increasingly put to the test as investors see them less as a safe haven asset and more like any other risky asset and could thus see large corrections if the situation continues to deteriorate.

"However, the 'fear and greed index' of bitcoin is signalling 'Extreme Fear'. Historically, excessive fear has resulted in bitcoin trading well below its intrinsic value, however we could see further correction with high risk assets due to ongoing geopolitical tensions, at least on the short term."

Smaller cryptocurrencies that usually move in tandem with the crypto also plummeted, with ethereum (ETH-US) — second-largest token by market value — lost as much as 14%. Its currently 7.7% lower to $2,467.

Solana (SOL1-USD) was 3.2% lower and memecoin doge (DOGE-USD) slipped 9%.

The sell-off in the crypto world was matched across other financial markets, including shares and oil prices.

"Investors are increasingly viewing cryptocurrencies as risky assets in particular with the rising participation of institutional investors on the market who are quick to react to such geopolitical events," said Daniel Takieddine, CEO of international brokerage firm BDSwiss, MENA.

Takieddine added all major tokens could see "additional price correction" and their "profile may become even more bearish" as the economic and political risks add to changing monetary policy in the US and elsewhere.

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Bitcoin enthusiasts have long touted it as a safe haven to hedge against inflation and other risks in traditional markets, often comparing it to gold. But as bitcoin sank, gold (GC=F) hit a one-year high as investors flocked to the safe haven, rising 3% $1,973 an ounce.

Earlier this month, US investment bank JP Morgan (JPM) argued in an analysis that the crypto's price is overvalued and pegged its "fair-value" at $38,000, around 12% below its then current price.

However, senior economist Steve Hanke — a former economic adviser to the Reagan administration — explained to Yahoo Finance in an interview last year that there is difficulty in deriving a value for bitcoin.

Read more: Gold price hits one-year high as investors flock to safe haven

"From a high theory perspective you end up with a bitcoin that does have a price, that is objective and we know what it is, but we don't know it's fundamental value and my guess is it’s probably zero," Hanke said.

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