Was it Nord Stream that caused Bitcoin to collapse?

Nord Stream, one of the pipelines that brings Russian gas to Northern Europe, was sabotaged on Monday.

On the same day, the price of Bitcoin fell from $20,300 to $18,800 within a few hours.

Are the two phenomena connected? That is, was it the news of the Nord Stream sabotage that caused Bitcoin to plunge on Monday?

Was the Nord Stream sabotage the cause of Bitcoin’s descent?

In reality, the timing does not coincide, but the impact may have been there.

Early unconfirmed rumors that Nord Stream may have been sabotaged began to circulate many hours before the collapse. In fact, when these rumors began to circulate, the price of Bitcoin rose from $20,000 to $20,300.

The US markets were closed and were about to open higher, so the price of Bitcoin was just anticipating this rise.

Usually, all it takes to move the financial markets are rumors. It is not the news that confirms or denies them that moves the markets, but often it is the rumors themselves.

The fact that when the first indiscretions were published, the price of Bitcoin went up, shows either that they had no impact or that the markets saw these indiscretions as mistakes.

Confirmations followed later in the day, but these were published hours before Bitcoin’s collapse.

Two explosions registered on seismographs a few hours before the leaks were discovered at the same coordinates according to SVT.

— Oliver Alexander (@OAlexanderDK) 27 September 2022

In fact, these confirmations were published minutes before the opening of the US markets, which opened sharply higher on Monday.

So not even the publication of the sabotage confirmation was able to cause Bitcoin’s price to collapse.

However, such news greatly contributed to the fear-mongering, although this growth was initially masked by the positive development first of Bitcoin’s price and then of the US stock market.

Negative performance for both Bitcoin and the US stock market

The crash was triggered about an hour and a half after the opening of the US markets, then first Nasdaq and then Bitcoin started falling.

While it is true that at the time images had begun to circulate on social media showing the aftermath of the sabotage damage to Nord Stream, it is hard to imagine that it was these images that triggered the panic, hours after the confirmation of the sabotage. published.

Indeed, it is very rare for markets to react to news hours after publication, so much so that even in the next few hours, the price of Bitcoin still fell as low as $18,500.

Thus, the trigger appears to be due to something else, and in particular something that caused the US stock markets to fall first, and then Bitcoin as a result.

The correlation between Bitcoin and the dollar index

Bitcoin’s two falls have coincided with two significant rises in the Dollar Index, which is the index that measures the value of the US dollar against a basket of foreign currencies.

The first of these increases was triggered after the Nasdaq had started to fall, so it was itself a consequence of the Nasdaq’s decline. In contrast, the second occurred overnight, with US exchanges closed, triggering Bitcoin’s further decline almost 24 hours after the first rumors of possible Nord Stream sabotage.

It was therefore a complex situation in which sabotage may have played a large role as well, but not a primary one.

The fact is that there has already been a lot of fear in the financial markets since the middle of last week. In a context where various fears regarding a possible escalation of the war between Russia, Ukraine and Europe had already been swirling for several days, the news of the sabotage of one of the pipelines bringing Russian gas to Europe only raised these fears.

At first, the markets did not react, probably because they put more weight on the possible recovery in the opening of the US stock markets, but as soon as this brief recovery came to a halt, the fears that had accumulated in the previous hours emerged triumphed.

The UK connection

It is worth noting that another element causing fear in the financial markets, especially those in Europe, is the evolving political, economic and financial situation in the UK.

In fact, the British pound also followed a similar path to Bitcoin at these times, but with several exceptions that occurred at other times.

The British pound has fallen very sharply since September 23, when the new government indicated that it will increase the already high public debt. Investors feared that this increase in debt would be financed by issuing new pounds, and these fears were confirmed yesterday by official statements from the central bank.

Therefore, especially in Europe, fears related to Russia were reinforced in the financial markets by fears related to the United Kingdom, so much so that the pound fell in relation to Bitcoin between Monday and Tuesday evening.

Except that the pound then fell again yesterday at the same time as Bitcoin rose a bit. So the apparent correlation would have broken down on Tuesday, but later in the day both Bitcoin and the pound rallied somewhat.

The general macroeconomic situation

As can easily be imagined, this is a rather complex situation, where there is not a single event that moves the markets in one directionbut several events affecting almost simultaneously and causing it to move in different directions.

If we extend the analysis to a longer period, for example September 2022, we see that the prices of Bitcoin continue to fluctuate with ups and downs between $19,000 and $20,000despite some brief excursions above and below these thresholds.

In contrast, for example, the Nasdaq trend is a downtrend, with current values 7% lower than they were at the end of August.

In other words, events affecting the markets cause Bitcoin’s price to move only over a very short period of time, because in the last month it has essentially lateralized, quite simply, just under $20,000. This reasoning can also be taken about the Nasdaq, but only if one extends the analysis to the last three plus months.

The fact that current levels are similar to those of June, despite the fact that the situation in Russia has definitely worsened since then, really suggests that for now the bad news coming out of Eastern Europe will only have short-term consequences for markets.