What is geopolitical unrest?
Geopolitical unrest is a situation where there is a breakdown of international relations or order, typically resulting in violence. It can be caused by various factors, including conflict between countries, economic instability, and political turmoil.
From Europe to Africa, the past months has witnessed many high-profile cases of geopolitical unrest. These events have had a significant impact on the crypto markets, with prices for Bitcoin and other digital currencies fluctuating in response to the news from affected countries.
How do global affairs impact cryptocurrencies?
It’s important first to understand how global affairs impact cryptocurrencies. Cryptocurrencies are:
- A global asset class.
- Meaning that global events influence them much more than traditional assets like stocks, CFD or bonds.
They are not tied to any specific country or region and are instead traded worldwide.
Global political uncertainty
Cryptocurrencies are also susceptible to global political uncertainty, which can lead to significant price swings in response to a coup d’état or a change in government. Investors tend to view digital currencies as a haven during political turmoil, with demand for them increasing as confidence in traditional assets falls.
Why are cryptocurrencies seen as a haven?
One reason is that they are not tied to any specific country or region, making them less vulnerable to economic or political instability. Additionally, cryptocurrencies are not subject to capital controls, meaning that they can be traded freely even in countries where currency restrictions exist.
It was notably the case in Venezuela, where the national currency, the bolivar, has been subject to severe inflation due to its economic crisis. It has made it increasingly difficult for Venezuelans to purchase essential goods and services, as the bolivar’s value has diminished.
Many Venezuelans have turned to Bitcoin and other digital currencies to preserve their wealth. It has caused demand for Bitcoin to surge in the country, with its price reaching nearly $20,000 in December of 2017.
Highly volatile
While Bitcoin is often seen as a safe-haven asset, it should be noted that its price is also highly volatile. It means that it can quickly lose value in response to geopolitical unrest as it can gain value. For example, Bitcoin’s price fell sharply after the U.S. presidential election in 2016, as investors worried about the potential impact of Donald Trump’s policies on the global economy.
While geopolitical events can significantly impact the crypto markets, it’s important to remember that they are just one of many factors influencing prices. Other factors include regulatory developments, technical indicators, and news about individual projects. As such, traders should always take a holistic approach to their trading strategy and pay attention to various factors before making any decisions.
So, what does this all mean for traders?
Global asset class
Firstly, it’s important to remember that cryptocurrencies are a global asset class and are therefore influenced by global events. It means that traders should always keep an eye on the news and be prepared to react to any developments that may impact the markets.
Susceptible to global political uncertainty
Secondly, cryptocurrencies are susceptible to global political uncertainty and can see significant price swings in response to events like a coup d’état or a change in government. As such, traders should pay close attention to news from affected countries and be prepared to take action if necessary.
Highly volatile
Finally, it’s important to remember that Bitcoin and other digital currencies are highly volatile assets, and their prices can fluctuate significantly in response to geopolitical unrest. As such, traders should always exercise caution when trading these assets.
In conclusion
Geopolitical unrest can have a significant impact on the cryptocurrency markets. However, it’s important to remember that they are just one of many factors influencing prices. As such, traders should always take a holistic approach to their trading strategy and pay attention to various factors before making any decisions. Visit this site to find out more; thank you for reading!
