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Russia-Ukraine crisis burnishes gold's safe-haven shine as Bitcoin lags

With a global conflict afoot, gold (GC=F) has revived its status as a safe-haven in times of turmoil.

But Bitcoin? Not so much.

Bullion on Thursday surged close to $2000 per ounce, its highest since 2020, after Russian forces attacked multiple targets across Ukraine, which prompted investors to flee risky assets. Meanwhile, the U.S. dollar — the world's premier reserve currency and another safe-haven during market duress — is gaining ground against a broad basket of currencies.

However, Bitcoin (BTC-USD) is behaving like the rest of the risk-sensitive market — which is to say its price is dropping like a rock. Despite some cryptocurrency investors promoting it as a safe-haven, Bitcoin's tumble of over 6% during the session underscores how the market largely views it as a risk asset.

Volatile markets show "there's no place to hide, not just for bitcoin but a lot of the alt coins that are falling as well," CoinDesk's Emily Parker told Yahoo Finance Live recently. "This sort of challenges this narrative of bitcoin being a unique asset because it's performing like stocks."

The leading crypto token's price has plunged this week as Russia's military campaign against Ukraine has ramped up.

“Bitcoin is often referred to as ‘digital gold’ because it has been regarded as a safe haven in times of upheaval - one that is uncorrelated with other financial markets,” Nigel Green, chief executive and founder of deVere Group, said in a statement.

“However, in the last day or so its price has taken a hit, in tandem with the stock market which also drops during more volatile periods. As such, Bitcoin is, currently, being regarded as a risk asset, alongside equities," Green added.

But ever since the Federal Reserve began hinting at tighter monetary policy, Bitcoin’s levels have been dictated by the mood of stock investors. Its 60-day correlation with the S&P 500 Index (^GSPC) reached its all-time high as of Wednesday, according to data from Coin Metrics.

“This isn’t surprising,” Noelle Acheson, head of market insights with crypto prime broker Genesis Trading, told Yahoo Finance. General market uncertainty on monetary and geopolitical policy is dominating higher-yielding assets, especially crypto.

She added that it was inevitable that Bitcoin would eventually “decouple” from equities, but there’s no telling when that might occur.

Other highly traded tokens like Ether (ETH-USD), Dogecoin (DOGE-USD) and Cardano (ADA-USD) fared even worse, dropping by double-digits on the day.

Another reason Bitcoin and other digital coins aren’t holding up, according to some market observers, is because they are considered to be “more liquid” they trade nonstop. No matter what, investors can sell it immediately, said Baxter Hines, Chief Investment Officer with Honeycomb Digital assets.

Both gold and cryptocurrencies are viewed by many traders as investment hedges against inflation. Whether Bitcoin does help investors save their assets from inflated prices has yet to be proven, but a recent survey from Charles Schwab suggests many investors believe it.

Nearly 26% of investors are hedging against inflation with crypto or other digital assets, while 23% are using gold to do it, the online broker found.

Meanwhile, Western sanctions against Russia are emerging as a secondary concern. The Biden administration moved this week to punish Moscow financially, aiming to block access to foreign capital. But the relative anonymity and decentralization of cryptocurrencies may help Russian actors skirt sanction efforts.

Monitoring flows on platforms that facilitate crypto buying and selling could be difficult. Last year, the U.S. Treasury Department sounded the alarm that cryptocurrencies posed a serious threat to the American sanctions program, and that U.S. officials needed to educate themselves on the technology.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.

Read the latest financial and business news from Yahoo Finance

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