Cryptocurrencies' safe-haven properties may be unsustainable amid Russia-Ukraine conflict

The price of bitcoin soared 20% earlier last week, topping $45,000 at one point, on speculation that sanctions and a plummeting ruble would force Russians to buy cryptocurrencies like bitcoin. However, as of this writing, the price of bitcoin has fallen back to $38,508.90 per coin. Today, the sustainability of cryptocurrencies as safe-haven assets has been put to the test.

Bitcoin was reportedly born in the wake of the global financial crisis as an alternative currency to the traditional monetary system. Since then, it has been promoted as a means of exchange and store of value that is free from government control. And today Bitcoin has become a major means of speculation, until this Russian-Ukrainian conflict revived the discussion of its safe-haven properties.

Figure 1 shows that the 60-day correlation between Bitcoin and the S&P 500 rose to 0.6 following the outbreak of the Russia-Ukraine conflict, and while the correlation between Bitcoin and the S&P 500 has now fallen from its highest level about a month ago, it is still high relative to historical levels.