Three quarters of the war and assets climb back

Nine months of full scale Russian invasion to Ukraine have passed. Since that moment I have been watching the performance of some currencies. American Dollar serves as a benchmark, for it is a globally recognized currency of the country with the strongest military power. From this perspective the dollar should be the most immune for military shocks, especially when conflict does not involve USA directly and is located far away from American soil. This is exactly how the war in Ukraine looks like.

Warzone currencies: Euro and Z?oty

The currency much more exposed to negative martial shocks are Polish Z?oty and Euro. Poland is the largest EU member state bordering Ukraine. Euro is a currency of the majority of European economies, and the war takes place in the same continent. Therefore, Z?oty should be , supposedly, more impacted than Euro.

Alternatives: Bitcoin and gold

Quite clear expectation towards Euro and Z?oty don’t apply to other, let’s say alternative assets: Bitcoin and gold. Both can be perceived as safe havens for the turbulent times. Therefore they should increase their value during wartime. They are not exactly the same: gold is a legacy, Bitcoin is a future. Potentially, gold would behave different than digital currency, and it would depend on investors’ sentiment. Would they prefer traditional models of wealth protection or rather believe in the bright future of digital economy?

A bit weaker dollar …

Assets amid the war story was quite simple: after a turbulent beginning all assets tend to lose their value in relation to American Dollar. Spectacular fail of Bitcoin, however, was rather related to the general crisis of cryptoassets, than to the wart. Z?oty and Euro behaved as they were supposed to: Z?oty lost more than Euro, as the currency more directly exposed to the war. In November all assets re-gain a bit of their value, except Bitcoin. Z?oty gained over 5%, Euro 4%, and gold 6%. Finally, Euro has climbed over 1:1 parity with dollar. It means that November was a month of a bit weaker dollar. As usual, market analysts look at US economy, FED actions, and global business trends as a major reasons for dollar drop this month. Generally, the impact of the war is not perceived as a decisive force shaping FX market today.

… and much weaker cryptocurrencies

Bitcoin is following the broader trend of cryptomarkets. Social media coined the term #cryptowinter, and the winter has definitively come. The cryptocurrency lost another 15% in November, as the result of the great FTX break down, another crypto exchange bankruptcy. It means that Bitcoin has lost more than half of its value since the outvreak of the war. Doubts about transparency, fairness, and sustainability of the whole crypto market are growing. Consequently, the valuation of crypotoassets is falling. Still, Bitcoin performs much better than some other kinds of cryptoassets. Whole NFT category is much more painful disaster. Some experts have already begun story telling about the definitive end of non-fungible-token world, but I think it is a kind of hysteric overstatement, quite understandable iun the middle of the rapid deterioration of tokens’ attractiveness.

The table below present monthly performance of the selected assets during the war, that is since Fabruary 24, 2022:

Average prices of selected asset in US Dollars, the average market price for 00:00 UTC of specific days; source: xe.com charts.