Bitcoin Slips Under $42K While Active Supply Reaches Yearly High

Bitcoin BTC$89,697.45 slid to below $41,500 during the morning hours in Europe on Friday as geopolitical tension in Eastern Europe worsened. The move followed a pullback in global markets after a building at a Ukrainian nuclear power plant briefly caught fire on Thursday night.

The euro slipped against the U.S. dollar, and the Stoxx Europe 600 equity index fell more than 2% on Friday, heading toward its worst week since March 2020. The MSCI Asia Pacific Index fell 1.7%, while futures on Nasdaq 100 dropped 0.8%. The Russian stock market was closed for a fifth straight day.

Even so, bitcoin can be viewed as a safeguard asset for investors. The cryptocurrency traded at a 40% premium in Russia earlier this week as Russians looked for a way to preserve value amid sanctions, crypto research firm Delphi Digital said in a daily note.

Supply of “active” bitcoin, or the amount of bitcoin moving between addresses in a 24-hour period, soared to around 565,000 bitcoin.

“This is the highest level seen in over a year. In fact, only 2 events have seen higher activity: Black Thursday in March 2020 and in May 2020” Delphi analysts said in a note. “The supply of bitcoin held by smaller addresses (0.001 – 10 BTC) saw a steep uptick, which could be a result of capital flight from the ruble to bitcoin.”

Some analysts see bitcoin prices moving upward, despite recent volatility in broader markets.

Alex Kuptsikevich, an analyst at FxPro, said in an email to CoinDesk that the recent drop in markets came in anticipation that the U.S. Federal Reserve will tighten monetary policies that were put in place after the coronavirus outbreak in early 2020.

“The momentum of pressure on the crypto market was due to the decline in stock indices, as the Fed gave signals of tightening policy,” Kuptsikevich said. “Technical factors also contributed to the negative dynamics – the inability to overcome the strong resistance of the 100-day moving average and mid-February highs around $45,000.”

Meanwhile, Nigel Green, CEO of financial services firm deVere Group, said in a note to clients earlier this week that bitcoin could reach $50,000 by the end of March.

“The Ukraine-Russia situation has caused significant financial upheaval and individuals, businesses and indeed government agencies – not just in the region but globally – are looking for alternatives to traditional systems,” Green said.

"Alternatives, such as crypto, prove to be credible and workable … savvy investors know this and will be further increasing their exposure to cryptocurrencies before prices rise further,” he added.

U.S. authorities have called on crypto exchanges to prevent Russia from circumventing sanctions. Meanwhile, the Bank of Russia hasn't softened its antipathy toward bitcoin and still advocates a complete ban on the circulation and mining of cryptocurrencies.

Bitcoin fell 4.5% in the past 24 hours to as low as $41,100 and was trading at about $41,600 at the time of publication.