Good morning, and welcome to First Mover. Here's what's happening this morning:

Market Moves: Bitcoin drops, gold rallies as Russia attacks Ukraine
Featured stories: Bitcoin risks deeper drawdown as traders prefer commodities and fiat safe havens amid Russia-Ukraine crisis.

And check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time. Today's show will feature guests:

Michele Schneider, managing director, Marketgauge Group
Dan Hannum, COO, ZenLedger

Today's newsletter was edited by Omkar Godbole and produced by Bradley Keoun.

Russia's decision to wage war on Ukraine has sent shockwaves through financial markets. While equities and bitcoin are down, gold, oil, base metals, agriculture commodities and currency market safe havens like the U.S. dollar and the Japanese yen are trading higher.

Broadly speaking, markets are displaying the usual unease with geopolitical tensions. However, some in the crypto community may be disgruntled to see the top cryptocurrency again missing a haven bid.

Crypto pundits have long hailed the top cryptocurrency as a better inflation hedge and haven asset than gold. However, price action, particularly since the influx of institutions and sophisticated players in the market after the March 2020 crash, suggests otherwise.

The cryptocurrency has moved more or less in tandem with stocks. Data tracked by Korea-based analytics firm CryptoQuant shows bitcoin's 60-day Pearson's correlation coefficient with the S&P 500, Wall Street's benchmark index, now stands at a record high of 0.56.

"BTC is getting adopted by traditional institutions," CryptoQuant said in a Telegram chat. "It's being owned by new players who trade stocks. Bad news: BTC is not a safe-haven asset. For now."

It's pretty clear institutional interest hasn't done for bitcoin what it was supposed to do, at least in the eyes of crypto investors –that is – establish the cryptocurrency as a digital safe haven better than gold.

The fact that fiat safe havens are doing better than bitcoin perhaps indicates that the cryptocurrency market as a whole is at the far end of the risk curve. Bitcoin was a largely uncorrelated asset before the covid crash and more so during the early bull cycles when institutional participation was almost non-existent.

Bitcoin's daily chart. (Chart by Skew)

A continued risk-off might push bitcoin down to $30,000, which acted as a strong support zone in January 2021 and three months to July 2021.

A potential break lower would confirm a double top breakdown on the weekly chart and invite more selling pressure.

Also read: Crypto Market Capitalization Slumps to $1.5T as Russia Attacks Ukraine

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Observers say the asset price declines brought by Russia's misadventure may have legs.

"The problem is this [Russia-Ukraine crisis] is now coming at a very bad time for markets," Christian Mueller-Glissmann, managing director of portfolio strategy and asset allocation at Goldman Sachs International, told Bloomberg TV. "The only way risky assets can make progress if central banks are tightening policy aggressively is if you have growth narrative and now you are dealing with a growth shock, particularly for Europe, but pretty much globally."

Historically, the S&P 500 has delivered positive returns during most Fed tightening cycles, except the one seen in the early 1970s, when the U.S. economy grappled with stagflation – a situation in which an economy experiences a simultaneous increase in price pressures and stagnation in growth.

Putin's war and the West's retaliatory sanctions on Russia, a major energy exporter, may exacerbate supply chain issues, bolstering inflation. The New York Fed's global supply-chain pressure index is currently at its highest since the 1990s, chart shared by The Daily Shot newsletter's Twitter handle shows. Brent oil has rallied above $100 for the first time since 2014.

"There is no doubt that inflationary pressures will arise from a surge in commodity prices. Russia and Ukraine remain some of the largest exporters of various precious metals and agriculture. The current conflict is bound to affect global prices," Matthew Dibb, COO and co-founder of Stack Funds, said.

Dibb added that the combination of war, supply constraints, booming commodity prices and zero rates are a textbook recipe for stagflation. While the crypto community still strongly considers bitcoin as a better store of value, past data shows the cryptocurrency is predominantly a risk-on inflation hedge, meaning it outperforms other assets when investors are willing to take risk.

The situation may not change anytime soon as traders are going for commodities or the so-called real-world assets in the wake of the Russia-Ukraine crisis. Regulators worldwide, including Ukraine's, continue to take an anti-crypto stance and the Fed is unlikely to walk back on plans to raise borrowing costs this year.

"We would hold shorts in most markets and consider long positions in precious metals. Maybe agro and commodities too," Laurent Kssis, a crypto exchange-traded fund (ETF) expert and director of CEC Capital, said in a Telegram chat.

Goldman Sachs is overweight commodities and precious metals. "You need to look at alternatives to protect the portfolio," Goldman's Glissmann told Bloomberg TV. "Raising cash is one way to reduce risk, but we have also looked at gold, safe haven FX and commodities broadly being a bit of a safe haven because they are at the center of this trouble."

In case you missed it, here are the most recent episodes of "First Mover" on CoinDesk TV:

Bitcoin, Crypto Markets Edge Higher, Ukraine Exchange Founder on Russia-Ukraine Conflict, Crypto Tax Talk

"First Mover" examines the current state of the crypto industry in the Ukraine amid the Russia-Ukraine conflict. The hosts speak with Michael Chobanian, founder of Ukraine Crypto Exchange KUNA. Also, crypto markets analysis from Marc Lopresti of The Strategic Funds. Will today's rebound last? As part of CoinDesk's Tax Week, David Kemmerer of CoinLedger takes aim at Form 1099-B.

Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.