In the past couple of weeks, geopolitical tension in Europe escalated so much that it transitioned to an invasion of a sovereign country and a flat-out war that’s currently taking place on its territory.

We saw most of the Western countries sanction Russia for its invasion of Ukraine by means they had in their possession, including expulsion from SWIFT, pulling out businesses from the country, cutting all sorts of economic ties, and so forth. Cryptocurrency exchanges were also asked to halt servicing Russian customers.

Amid this tumultuous economic and geopolitical climate, Bitcoin and cryptocurrencies, in general, were touted as an alternative asset that’s apolitical and uncorrelated to traditional finance. Chipping in on the matter was Meltem Demirors, the Chief Strategy Officer at CoinShares.

Risk-On v. Risk-Off Assets and the Current Environment

Before we dive into what Ms. Demirors had to say, it’s worth explaining what risk-on and risk-off assets are.

Risk-on and risk-off assets have much to do with the notion of risk sentiment or, in other words, what’s the current risk tolerance of investors in the existing economic paradigm. During risk-on situations, investors tend to have a high appetite for risk and bid up the prices of certain assets in the market.


On the other hand, during risk-off situations, they become more risk-averse and tend to sell some assets.

Now, what assets they sell depends on how risky they believe holding these assets is. Therefore, a risk-on asset would be one that is riskier compared to a risk-off asset. While holding it would normally carry the promise of a better return, holding it during economic turmoil can also result in a more significant downside.

Now that we have that clear, it’s worth noting that the current economic climate can be considered uncertain, to say the least. The world is coming out of a global pandemic, the US is considering rate hikes to battle the increasing inflation, businesses are facing new paradigms, and to top it all up, there’s a literal war going on in Europe.

So, where does this leave Bitcoin?

Meltem Demirors
Meltem Demirors. Source: Yahoo

Bitcoin to Become a Risk-Off Asset

Speaking to Bloomberg Crypto, the Chief Strategy Officer of CoinShares – Meltem Demirors – summarized the last few weeks with what’s been going on in the world, not limiting the challenges solely to the war in Ukraine.

I think that it’s been a very interesting few weeks. Not only do we have this conflict happening in Western and Eastern Europe but we also recently had the Canadian truckers and their access to the banking system getting cut off. […] It was an instance where there was a lot of conversation around Bitcoin and cryptocurrency.

She argued that there’s a growing global awareness that “for the first time citizens, who really are the victims of wars that are fought by superpowers, they have a choice.”

Bitcoin and cryptocurrencies are non-political global money, and again, we’re not only seeing increasing trading activity in Ukraine in Russia (see report) but also a lot of the trading activity coming from the US as people are looking at what’s unfolding around the world. Maybe this is the start of Bitcoin no longer being a risk-on asset, but potentially, over time, becoming a risk-off asset.

Naturally, Demirors also explained that a couple of weeks is certainly not enough time to prove this relationship definitively, but she is hopeful that data from the next months and years will help establish the thesis.


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