Navigating the Crypto Market During Geopolitical Crises

As our world becomes increasingly interconnected, the impact of a geopolitical crisis can rapidly be felt across the global financial markets. In the crypto space, which is already exceptionally volatile, it is critical for traders and investors to get to grips with the ways in which geopolitical events can impact digital asset prices. They must understand how to formulate the best trading  strategies for safeguarding their funds, during times of international upheaval.

In this post, we’ll be examining the relationship between geopolitical turbulence and the crypto market and discovering valuable tools for protecting your portfolio and successfully riding out the storm.

The Relationship between Crypto Market Volatility and Geopolitics

Many investors perceive established cryptocurrencies, such as Bitcoin and Ethereum, as a great safe-haven in times of global uncertainty, providing a hedge when traditional markets are in flux. However, the way the crypto market will respond to geopolitical crises is hard to predict, and depends on a variety of factors, ranging from the status of crypto legislation to market sentiment.

Here are a few examples of how the crypto market can be influenced by geopolitical upheaval:

Crypto as a Store of Value When a Fiat Currency is Devalued

Currency devaluation commonly occurs when the political climate is turbulent. In these circumstances crypto can present an attractive alternative. This was particularly evident in 2016, when the UK referendum on EU membership resulted in Brexit. In the immediate aftermath of the vote, Bitcoin surged in value, as investors turned to digital currency and abandoned pound sterling.

Geopolitics as a Catalyst for Crypto Legislation

In some cases, the under-regulated nature of the crypto arena has motivated governments to introduce new crypto regulations, in response to global events. For example, Russia’s invasion of Ukraine in 2022, and the subsequent outbreak of war, resulted in a substantial rise in crypto adoption, as many Russians sought ways to circumvent economic sanctions by transferring their assets into cryptocurrency, as a means of preserving their wealth. This has led to a renewed focus on crypto legislation to prevent the sidestepping of sanctions.

Reduced Crypto Mining Resulting from Internet Disruptions

The Russian invasion of Ukraine has also had a negative impact on crypto usage, when considering the significant damage to infrastructure caused by the war. Destroyed power lines, timed blackouts and other disruptions to internet service, as well as limits on access to power resources, have all taken a toll on Bitcoin mining and other crypto trading activities.

Vulnerability to Market Volatility Due to Negative Sentiment

One of the biggest global catastrophes of the 21st century to date has been COVID 19. The pandemic was not only  a health crisis, but also a hammer to the global economy, which hit with full force in 2020. The fear and uncertainty it created, equally impacted both traditional and digital currencies, resulting in a massive crypto sell-off. However, the major crypto coins all bounced back in time, alongside fiat currencies, in response to massive government stimulus packages. 

Investment in Crypto as a Hedge Against Market Uncertainty

During geopolitical crises, it is common for investors to rely on crypto resilience, perceiving it is a hedge against global economic uncertainty. This is exemplified by the spike in Bitcoin prices during the trade war between the US and China from 2019 to 2020.

Arguably as cryptocurrencies gain legitimacy and broader popularity with greater regulatory oversight and institutional adoption,  the role of Bitcoin and other established cryptocurrencies as a safe-haven asset will rise as its risk profile changes.

Tips for Crypto Traders for Mitigating Geopolitical Risks

To best protect yourself from geopolitical risks there are a number of simple steps that you can take:

• Keep an eye on what’s happening in the news, and the ways in which geopolitical events are impacting the crypto market. In particular, pay close attention to the regulatory responses of international bodies to global developments so you can stay on top of all new crypto legislation  
• Diversify your portfolio with a range of digital and traditional assets, so that an event primarily affecting one region or asset class, will not wipe out your savings
• Take a long-term approach to your portfolio, focusing on crypto trends over extended periods, rather than just seeing the short-term picture 
• Implement stop-loss orders to protect your capital from plummeting prices during geopolitical upheaval
• Use a Dollar Cost Averaging (DCA)  strategy, with small investments at regular intervals, over an extended period, as opposed to trying to exploit short-term market shifts to insulate your portfolio from the fallout of geopolitical crises
• Make sure that some portion of your crypto capital is in stablecoins, so that in periods of high volatility, you have a safe-haven and are maintaining your foothold in the crypto space.
• Perform an in-depth analysis of the project fundamentals, market capitalization, regulatory status, security, liquidity,  technology, community support, ecosystem growth, and unique utility, for every crypto and blockchain project you invest in, to ensure that it has long-term viability and can withstand a period of geopolitical turbulence

Reasons Why Crypto Has an Increasingly Prominent Role Geopolitics

Cryptocurrencies have an ever-growing role during geopolitical crises.  Firstly, as we have seen, they serve as a means of preserving wealth by providing an alternative store of value, during periods of uncertainty where a local currency is devalued, and inflation is rising. Secondly, in areas of the world suffering from instability that have strict currency controls and large numbers of unbanked citizens, cryptocurrency provides access to essential financial services. 

Beyond the purely financial, blockchain technologies can offer invaluable assistance to countries suffering through a conflict or natural disaster. Crypto enables the instant, borderless transfer of funds for  humanitarian aid. Also the transparency and immutability of the blockchain, allows funds for humanitarian efforts to be tracked.Here at Algosone.ai, our artificial intelligence-based trading bot trades across a diverse range of markets, including crypto, stocks, commodities, indices and forex. The machine-learning algorithm evaluates mountains of up-to-the-minute data in every language from a massive array of sources, 24 hours a day, responding to global market opportunities, as they arise. Users can hold balances in USD, Bitcoin, Ethereum and Solana, while the platform supports deposits and withdrawals in a wide range of additional crypto and fiat currencies. Our institutional-grade AI is learning all the time from every new trade and dataset, to mitigate risk from geopolitical instability and predict price movements with increasing accuracy.

The sophistication of our deep-learning algorithms enables the AlgosOne AI trading bot to successfully navigate the crypto market in all kinds of geopolitical conditions and generate consistent, predictable profits for our users. 

As the crypto market evolves and it gains users and legitimacy, its role on the global financial stage is set to grow. The unique characteristics of blockchain technology and crypto assets mean they are an excellent store of value in times of uncertainty and offer a great way to diversify a portfolio to help weather a geopolitical crisis.   To learn more about cryptocurrencies, trading, the blockchain,t he role of artificial intelligence in finance and a range of other related topics, check out the rest of the  AlgosOne blog.