Bitcoin (BTC), the world’s premier cryptocurrency, finds itself at the center of a growing schism in the world of finance as the West attempts to impose punitive sanctions on the Russian financial system for Putin’s unprovoked incursion into Ukraine, while Russian citizens seek to salvage their savings by turning toward Bitcoin.

Bitcoin was hammered toward the start of 2022 as the US Federal Reserve’s hawkish pivot hammered risk assets in general and high-beta, growth-heavy tech stocks in particular. Surprisingly, Bitcoin failed to live up to its touted credentials as a viable inflation hedge, suffering the same fate as the US tech stocks and contributing to a confoundingly high correlation between the two. We’ve attempted to explain the reasons behind this troubling development in a new series of articles that will go live as part of the WCCF Pro initiative. Nonetheless, short-term speculators appeared to have provided a significant contribution toward this disconcerting correlation regime that prevailed from early January up till the end of February.

Intel’s Bonanza Mine Bitcoin mining system leads the market in performance

Against this backdrop, the Russia-Ukraine war seems to have provided a short-term reprieve to Bitcoin bulls. Consider the fact that Bitcoin is essentially flat over the past 1 month while Nasdaq 100 is still down over 4 percent, based on Thursday’s closing price. This outperformance by Bitcoin was a result of a relatively robust rally that coincided with Russia’s invasion of Ukraine.


As is evident from the snippet above, Bitcoin’s correlation with S&P 500 index is currently hovering at 0.427. This means that 42 percent of the move in Bitcoin is explained by moves in the S&P 500 index. However, back on the 19th of January, this correlation stood at a whopping 0.674.

Readers should note that Bitcoin, with its decelerating supply addition, is often touted as digital gold. However, the cryptocurrency’s high correlation with equities in general and high beta, growth-heavy tech stocks in particular over the recent past presented a direct threat to the claims that Bitcoin was a superior hedge against inflation. It is for this reason that we accord significant importance to Bitcoin’s latest rally as it has resulted in a shift in the narrative to one where Bitcoin is touted as a superior hedge against geopolitical shocks as well as financial repression.

There is now a growing consensus that Russian inflows seem to have played an important role in the advent of this new regime. Let’s delve deeper.

Bitcoin is Receiving a Consistent Bid from Ordinary Russians and Ukrainians

According to Saxo Bank, Russian households held around $200 billion in crypto assets in early February. Moreover, Ukraine had also legalized cryptocurrencies back in February, precipitating greater flows into this nascent sector.

Intel unveils BonanzaMine to assist in ASIC Bitcoin mining acceleration at ISSCC

As the Russia-Ukraine war ratcheted up, so did the incapacitation of the financial sector in both countries, with Ukraine’s hammered by violence while Russia’s degraded by Western sanctions. Against this backdrop, it is hardly a surprise that Bitcoin – Ruble (BTC – RUB) exchange volume has been soaring recently, as per a tabulation by the crypto analysis firm Kaiko. The snippet below details BTC – RUB price action on Binance. Notice the surge in bullish volume from late February into March 2022.


This suggests that an increasing number of Russian households have been buying up Bitcoin to prevent their savings from becoming worthless as the Russian Ruble plowed new all-time lows.

Moreover, Bitcoin was trading at a 40 percent premium in Russia toward the start of March, suggesting outsized demand.

Finally, Delphi analysts observed in a recent investment note:

“The supply of bitcoin held by smaller addresses (0.001 – 10 BTC) saw a steep uptick, which could be a result of capital flight from the Ruble to bitcoin.”

Now that we’ve established a consistent Russian bid for Bitcoin, the question emerges how sustainable is the cryptocurrency’s current rally.

Is the World’s Premier Cryptocurrency Headed Toward a New All-time High?

The answer, quite frankly, is a resounding no. While the Russian bid seems to have staved off deeper price plunges, Bitcoin still remains vulnerable, as evidenced by its still-considerable correlation with Nasdaq 100.

Moreover, bearish pressures appear to be building again. Consider the fact that Bitcoin failed to turn the $42,000 into a support. This is needed for further price advancement.

Crucially, both Bitcoin longs, as well as shorts, have been suffering from high liquidations, leading to wild whipsaws:

Nonetheless, there is hope for the Bulls yet. Bitcoin’s estimated leverage ratio – a key metric to gauge speculative demand – has been in a downtrend as funding rates whipsaw.


This means that short-term traders are keeping their distance. More importantly, this paves the way for consolidation and a new sustainable bull run, perhaps in Q2 2022.