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Crypto meets international affairs
If Russia invades Ukraine it will send shock waves around the world. Everything currently points to an imminent attack and diplomacy appears dead. The U.S. government has told American citizens to evacuate as have other countries and U.S. Embassy staff are leaving.
That means there is credible information that an attack is coming.
What does all this have to do with crypto?
A major conflict will create a risk-off appetite in the markets and that means money will flow to safer assets. Crypto isn't one of them, at least not yet. And in an otherwise down market for U.S. equities, gold has been rising.
While Bitcoin, in theory, should be that hedge, it still largely tracks with US equity markets (not perfectly, but enough to not make it a good hedge.)
The effect on markets could last weeks or months depending on the extent of the hostilities. Does fighting along the Belarus border threaten NATO-ally Poland or is there a Russian attempt to take Ukraine's capital Kyiv, for example.
There's no use trying to predict specific prices (no one truly knows even if they play "expert" in Youtube videos,) but suffice to say there are serious short-term headwinds blowing our way.
Meanwhile, Bitcoin is not only being used to help fund a military resistance in Ukraine. Russia has also reversed its stance on the crypto and looks likely to legalize its use. That might help Moscow avoid sanctions as banks start accepting BTC. Strange days indeed.
U.S. Federal Reserve action on inflation another risk factor
This is all in addition to the U.S. Fed potentially raising interest rates 0.5% instead of 0.25% at their next meeting. U.S. inflation was through the roof, again in January. All that money printing wasn't going to end well, and it isn't. Just month sago the Fed was calling inflation "transitory."
And while crypto, or at least Bitcoin, was initially created with exactly this scenario in mind, it hasn't acted as a credible alternative. Bitcoin's price continues to gyrate wildly, causing many investors to shy away from the asset in favor of more secure U.S. treasuries.
Bottom line . . . longer term crypto still has its function as a better, faster, and cheaper way to conduct business and provide new services. Short-term, get ready for another rollercoaster ride. . .
Other recent articles on crypto markets that might be of interest (all short reads.)
Keeping Perspective When Crypto Markets Turn Red
For more insights connect on Crypto_Research_Group on Reddit.
Image by Mahdis-mousavi, Unsplash
