Some supporters of Ukraine gathered in front of the Russian Embassy in Bangkok to call for peace and an end to the war. Source: Twitter/@MayWongCNA
It is the second day of Russia's invasion of Ukraine, the first undeterred by the sanctions imposed by some Western countries. Among a host of possible effects the war could have or has already had globally, the effect on the crypto industry is also being discussed.
On Friday, the majority of the crypto market recovered in the last 24 hours from the general redness seen yesterday, although it remains mostly red for the week. Bitcoin (BTC) is trading around €39, while Ethereum (ETH) retests the €000 level.
According to the trading team of crypto exchange Bitfinex,
"Markets in all areas dance to the rhythm of geopolitical events."
In a comment to Cryptonews.com, they argued that Bitcoin was running "in parallel" with other "risk assets" as Russia's invasion of Ukraine "sent global financial markets into a tailspin."
Nonetheless, the team notes that there is still "considerable development and innovation in the digital token economy," despite current events in Europe, with long-term sustainable plans laying a solid foundation for future growth.
Anto Paroian, COO of digital asset investment fund ARK36, also argued that for a few weeks now, the main driver of price movements "in the broader spectrum of risky assets" has been the prospect of geopolitical escalation. , and now that the war has happened, investors have rushed to “take risk off the table”.
However, not everyone agrees with some of the opinions shared above.
Mati Greenspan, founder and CEO of Quantum Economics, told Cryptonews.com that geopolitical issues have not had much of an impact on financial markets and "certainly not on bitcoin."
The CEO went on to say that the number one crypto had “almost never been significantly affected by a geopolitical event before,” with rare exceptions when the market was underdeveloped. But in general, according to him,
"Bitcoin tends to trade on fundamentals, not geopolitical fundamentals."
In his latest newsletter, Greenspan reiterates his view that Bitcoin is not going down because of the war in Ukraine, asking, "What kind of HODLer would be incentivized to part with their Bitcoin due to geopolitical uncertainty?"
As for what influences the price, the CEO writes:
“Net income, bitcoin and stock markets continue to decline due to the tightening of Federal Reserve policy. The headlines and the sheer shock of what is happening in Eastern Europe may have exacerbated the movements, but they are probably not the main cause.
As noted, there has been a lot of talk lately about what economic policies the European Central Bank (ECB) and the Federal Reserve plan to announce in March, and whether the latter will go ahead with rate hikes and, if so, how many for this year alone.
So where could BTC go from here?
While all of this was being discussed, analysts and traders in the crypto market and beyond have been closely watching the price movements of cryptocurrencies.
As the market is bullish today, Ruud Feltkamp, CEO of cryptocurrency trading bot Cryptohopper, said in a comment yesterday that he was "very curious how the price of Bitcoin would react" to events in Ukraine. .
Feltkamp's conclusion is that,
"Honestly, I think it's going pretty well. Regardless of the war, I expected a slight decline anyway, after which another retest is expected. The question is whether that will still happen, of course. »
Coming back to the aforementioned correlations, Dr. Amber Ghaddar, co-founder of independent protocol chain AllianceBlock, opined that BTC and crypto, in general, showed high correlation and high beta against assets at risk in the past year, adding :
"In the current risk environment, BTC and cryptocurrencies have a negative outlook barring positive idiosyncratic events that could support prices. A rise in Russian military action will continue to put downward pressure on prices."
As for what the market should be looking for, Ghaddar noted that movements on the US Nasdaq exchange have been "an indicator" of crypto movements for a year now, saying: "Crypto negative beta for Nasdaq is Pretty high as we've seen again tomorrow with Nasdaq down 2,6% premarket and BTC down around 6,4% since the US close.
Ghaddar made this comment yesterday during the price cuts. Since then, in addition to the renewed greenery in the crypto markets, the traditional markets also saw a strong rally ahead of their close yesterday, with the Nasdaq Composite Index posting a 3,44% gain.
According to Mati Greenspan, since the beginning of 2021, bitcoin has moved in "a very wide range", between around €29,000 and €69,000, while now it is "pretty low in this range". Support is now building around €32,000, he says, but adds that he wouldn't be surprised if it breaks a bit.
That said, Greenspan noted,
“But that's the wide range. The way to play a range is usually to buy low and sell high. And if you look at the chart for more than the last few hours, you should be able to see that we are pretty low. We are well below our 200 day moving average at this point.
Still, these things are never certain, and the price could theoretically go as low as 20,000, he notes, emphasizing that the drop would not be related to the situation in Ukraine, according to him, but to things that are "more connected right now." with the liquidity of the market and the amount of dollars that are being printed, interest rates are going up in the United States”, adding:
"These kinds of things are our cash zappers."
Veteran trader and technical analyst Peter Brandt suggests that we need to see the next price move to start speculating on what it might do from there.
“We need a high volume wash on BTC to purge the last few laser eyes. I think it's under 27.000 so I'll take a look. We might bounce from 30,000 first, we'll see,” Brandt told Cryptonews.com.
NFTs and stablecoins in the face of volatile geopolitics
Meanwhile, Amber Ghaddar discussed the most and least vulnerable segments of the crypto market. Aside from stablecoins, she said, the least vulnerable should be non-fungible tokens (NFTs).
Since most NFT investors are not dealers but collectors, we can expect two things, he said:
- its cryptographic price will increase to approach the previous value in dollars, especially for first class names,
- or the floor will remain stable, creating opportunities for those who still have stablecoins.
Furthermore, Ghadder argues that it would be interesting to monitor
In previous downturns, BTC was less volatile than other layer 1s, “whereas layer 2 with its high beta on layer 1 would take the brunt of the downward move,” he said. Layer 1 refers to the base protocol or the blockchain itself, while layer 2 refers to any protocol built on top of that blockchain.
What would happen if Russia adopted BTC?
Meanwhile, there have been recent talks that Russia could turn to cryptocurrency, and specifically BTC, in the face of tougher sanctions. Whether the probability is up for debate, but what is certain, in Greenspan's view, is that "we can't stop Russia from using bitcoin."
If they choose to use it, or even adopt it in the same or a similar way in El Salvador, that "would be a game changer for sure from a bitcoin perspective." This would not necessarily be a positive development for the coin.
People who host BTC and are part of the Bitcoin network understand that this is a freedom mechanism, Greenspan said. So while Bitcoin would still be free, the use of BTC in Russia would make it "more difficult to accept" for example by the United States and its financial institutions, which would subsequently be forced to do "a lot more verification before accepting." a bitcoin transaction" coming from Russia.
“It could add a lot of red tape,” he said, noting that, at the same time, adoption by this great country would “definitely increase the use of bitcoin.”
There is also the bitcoin mining factor in this equation. The United States, and some states in particular, have welcomed Bitcoin and cryptocurrency miners fleeing the ban in China. “Certainly if Russia is seriously considering adopting bitcoin, or if it is forced to do so, it will also want to increase its hash rate,” Greenspan noted.
Other players are likely to focus on this, as governments aren't necessarily particularly concerned with who controls the hashrate, but there is a financial incentive to control it, he said.
Also, according to him, there is a financial incentive for everyone to keep Bitcoin decentralized because as soon as a centralized authority has too much power within the network.
In his latest newsletter, Greenspan also talks, among other things, about Ukrainians fleeing the country after the invasion. He points out that:
“Those who flee, however, may find it difficult to acquire resources, with massive lines forming at gas stations and martial law imposed on local banks. Currently, ATMs are working, but there is a cash withdrawal limit of 100 Ukrainian hryvnas per day (about 000 at current levels). As we know, Bitcoin fixes that.