Bitcoin plunged 15.85% to $36,244 over the past week. Major currencies also showed negative dynamics against the US dollar. The Japanese yen and the Swiss franc (protective assets) closed in positive territory on the heels of a flight from risk assets.
The recent rout in stock indices and soaring UST yields were the key drivers behind the latest flash crash in cryptocurrencies. The S&P 500 (-5.7%) and Nasdaq (-7.6%) posted their steepest weekly percentage drops since the onset of the pandemic in March 2020.
On Monday, January 24, index futures opened higher in Asian trading. The BTCUSD pair rose to $36,499 from which it declined to $33,029. By the time of writing, the pair was down 8.66%. S&P 500 index futures dropped to a new low at $4,361. Meanwhile, Russian stock indices and the ruble nosedived. It was the decline in equities that triggered today’s flight from risk-sensitive assets.
The reason for instability of Russian assets could be uncertainty surrounding international politics ahead of the US response to Moscow's proposals for security guarantees. Russian equities retreated amid reports of an escalation of the conflict in eastern Ukraine. Meanwhile, US President Joe Biden is considering sending up to 5,000 troops to Eastern Europe. The US and the UK ordered the evacuation of personnel and their families from their embassies in Ukraine.
The situation in Ukraine triggered the sell-off in Russian assets. After that, sellers in other markets capitalized on the turmoil to drive down assets in other markets.
The cryptocurrency market has been going through a thunderstorm, with the weather set to get worse as another storm is brewing. In addition to geopolitical factors, the US Federal Reserve meeting (January 26) remains in the spotlight. Sellers have two levels in their crosshairs: $32,250 and $26,900. Sellers have been markedly more aggressive than buyers, so unless some positive news rolls in, the latter will be unable to turn the bearish trend around.