FX.co ★ BTC unable to rise due to geopolitical headwinds

On Thursday, bitcoin performed a downward reversal. It was hovering around $42,000, trying to break through the 50-day moving average due to renewed concerns about Russia's invasion of Ukraine. It affected stock markets and risky assets.

BTC dropped by 5.4%, while ether, the second-largest token, slid down by 5.7%. Polkadat decreased the most among tokens with a smaller capitalization.

"The geopolitical situation in Europe and Ukraine is having material impact," Barbara Matthews, founder and chief executive officer of BCM Strategy Inc., said. "But, I think it's underappreciated how much monetary policy continues to generate uncertainty and volatility in the markets," she added.

On Wednesday, the Federal Reserve published the minutes from the committee's January meeting. They confirmed the regulator's plans to act quickly to quell rising inflation with tightening monetary policy. However, traders appeared to expect the stance. Therefore, the market reaction was muted. Bitcoin, which has recently shown a strong correlation to the movements of US stock indices, rose with the S&P 500 index shortly after the publication of the minutes.

Matthew Sigel, the head of digital assets research at VanEck Associates, said that large falls in stocks or sharp spikes in oil and bond yields may lead to an exaggerated drop in cryptocurrencies. However, he noted that Bitcoin's volatility looks like a long-term downtrend, with the Nasdaq 100 index showing more standard deviation movements than the five-year average compared to the coin.

"Bitcoin network participants have enjoyed consistent outperformance versus equities with volatility that while high is showing a declining relative trend," Sigel said.