Cryptocurrencies rose on Friday following a steep sell-off a day earlier that saw around $150 billion wiped off the market after Russia invaded Ukraine.
Bitcoin last rose 1.6% to $39,065.00, according to Coin Metrics. Earlier in the day the cryptocurrency had jumped as much as 11% over the previous 24 hours, after falling as low as $34,338.57 on Thursday. Ether rose 2.1% to $2,709.22.
Thursday’s sell-off was sparked by Russia’s invasion of Ukraine that also saw global stocks fall sharply. For several months, bitcoin has been correlated with other risk assets like stocks, as more institutional investors get involved and short-term investors who trade bitcoin like other risk equities have have entered the market.
The sharp drop was a reminder that “in a crisis, all correlations go to 1,” Noelle Acheson, head of market insights at Genesis, told CNBC, adding that it reinforced bitcoin’s risk asset characteristics. Meanwhile, the bounce shows the longer-term investors “have been waiting in the wings to buy the dip” and that risk traders are now betting things “won’t be as bad as they looked at first light,” she said.
“On the markets, we’ve known for some time that a big move was coming — this usually happens after periods of consolidation, and activity in the options market was pointing to this also — but we didn’t know in which direction,” Acheson said. “Now we know: both.”
The 60-day correlation between bitcoin and the S&P 500 reached its all-time high on Wednesday, according to Acheson said.
“The correlation has been over 0.5 on two other occasions, and each time reverted back to lower levels,” she added. “It is likely that we see the same again, as risk investors cede price-setting ground to longer-term investors who see bitcoin as an insurance asset in times of geopolitical uncertainty, currency turmoil and inflation. What we don’t know is when this will happen.”