FTX CEO speaks on market crisis amid the Russian invasion of Ukraine
- Sam Bankman-Fried said Eastern European countries could consider Bitcoin an alternative to their destabilised currencies
- He also explored the contrasting positions between fundamental and algorithmic investors
Early Thursday, reports of invasion into Ukraine by Russia’s military led Bitcoin and other crypto markets tumbling. Stock markets also fell along with cryptocurrencies as Russia started what President Putin called a demilitarisation operation in Ukraine.
In a recent Twitter thread, FTX CEO Sam Bankman-Fried has shared his view on the massive correction that crypto markets saw. According to data provided by CoinMarketCap, Bitcoin fell as low as $34,459. Markets have recovered to some extent and the ticker is currently trading at $35,482.
Conflicting sentiments on Bitcoin’s price
To begin with, Bankman-Fried explored two scenarios. He explained that on the one hand, the crisis escalating means there is less free money around since people have to “pay for war“, – which results in the widespread sell-off of assets, including Bitcoin and stocks.
Then again, he said that Russia’s escalated military action would likely destabilise Eastern European currencies, possibly turning BTC into a crisis hedge. As such, he theorised financial systems in the region might as well be seeking an out (Bitcoin) for their assets.
“On the other hand, this is likely destabilising for Eastern European currencies. And, more generally, for Eastern European financial systems. Which means they might be looking to alternatives. If you were in Ukraine right now, where would you trust your money?” he said.
With these contrasting scenarios, he opined that both sides of the ‘how Bitcoin should be behaving’ conversation have a case to argue.
The push and pull between two investor groups
Explaining that the fundamentals did not indicate Bitcoin would nosedive, the FTX CEO grouped investors into two; fundamental and algorithmic.
The algorithmic investor is the one whose trades would be based on historical data patterns. Recent estimates show that Bitcoin is showing up to 80% correlation with stocks; hence when algorithms see stocks falling, they expect Bitcoin to plunge too.
Fundamentals, on the other hand, remain uncertain on which direction it would go. The push and pull that ensues between these two groups causes Bitcoin to stall midway as it has done today.
“Fundamental investors are neutral, but algorithmic investors see the S&P500 go down 4%, and so expect BTC to go down 4*4%=16% based on historical studies. There’s a push and a pull, with fundamental investors buying and algorithmic investors selling; on net, BTC ends up halfway in between, down 8% on the day,” he said suggested.
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