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Thursday, August 18, 2022

Brent oil hits 8-year high, Bitcoin plunges as Ukraine crisis escalates

Working pumpjacks are seen in the Montebello Oil Field in Montebello, California, on Wednesday. (Photo: AFP)

Brent oil surged to US$100 a barrel for the first time since 2014 as Russia’s dramatic escalation of the Ukraine crisis sparked fears of a disruption to the region’s critical energy exports.

Futures in London jumped as much as 3.3% after a report that Russia’s President Vladimir Putin has decided to conduct a special operation to “protect” the Donbas region. This week, Putin announced he had sent “peacekeeping forces” into the two separatist regions recognised by Moscow, heightening fears among western governments of a full-blown invasion of Ukraine.

Russia is a key supplier of energy to global customers, with Europe relying on the nation for about a quarter of its oil supplies and a third of its gas.

Meanwhile, Bitcoin slumped to a one-month low.

The largest token fell as much as 7.4% to $34,783 after an initial Tass report on Russia’s decision. Second-ranked Ether declined as much as 8.7% to $2,390.61. Other coins like XRP, Cardano and Solana were also down.

Bitcoin’s swings during the past weeks of escalating geopolitical tensions have served to undermine the argument that cryptocurrencies offer a hedge in times of trouble. The traditional haven gold, meanwhile, surged to the highest level since early 2021 on Thursday. 

“Risk assets continue to be weighed down by the Russia-Ukraine conflict and tensions. This includes Bitcoin and cryptocurrencies which are currently still very much viewed as a high-risk asset class,” said Vijay Ayyar, vice president of corporate development at Luno, a crypto platform. 

The next key level to watch for Bitcoin will be $28,000 to $29,000, he said. If that threshold gets breached, “we could be looking at much lower levels in the low $20,000s and below.”

A screen capture of the Bitcoin market.

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