Bitcoin Fundamentals vs. Fundamentals of Geopolitics – Analysts on Ukraine War

It is the second day of the Russian invasion of Ukraine, the former of which is not deterred by the sanctions of certain Western countries. In addition to a variety of possible effects that the war could have or may have already had worldwide, the impact on the crypto industry is also discussed.

On Friday, the majority of the crypto market has recovered in the last 24 hours, since the overall reddening observed yesterday – albeit still largely red over the week. Bitcoin (BTC) is trading around USD 39,000, while Ethereum (ETH) is testing the USD 2,700 level again.

According to the trading team of the crypto exchange Bitfinex

“The markets across the board are dancing in line with geopolitical events."

In a comment for * *, they argued that Bitcoin appears "in step" with other "risk assets", as Russia’s invasion of Ukraine "brings global financial markets into a tailspin."

Nevertheless, the team emphasizes that despite the current events in Europe, there is still "an enormous development and innovation in the entire digital token economy", with long-term sustainable projects, laying the solid foundations for future growth. Anto Paroian, chief operating officer at the digital Asset Investment Fund ARK36, also argued that the main driver of price movements "in the broader risk spectrum" has already been the prospect of geopolitical escalation for several weeks – and now that the war has taken place, investors"hastened to take risks off the table."

Not everyone agrees with some of the opinions shared above.

Mati Greenspan, the founder and CEO of Quantum Economics, said * * that geopolitical affairs did not have a big impact on financial markets and “certainly not on Bitcoin."

The CEO went on to say that the number one crypto "has almost never been significantly affected by a geopolitical event before", with rare exceptions, while the market was underdeveloped. But overall, he said,

“Bitcoin tends to act on its foundations and not on the foundations of geopolitics."

In his latest newsletter, Greenspan reiterates his opinion that Bitcoin is not falling due to the war in Ukraine and asks: "What kind of HODLer would be tempted to part with their Bitcoin due to geopolitical uncertainty?"

What * affects the price *, writes the CEO:

"The bottom line is that Bitcoin and the stock markets are moving further down due to the tightening of Federal Reserve policy. Headlines and the sheer shock of what is happening in Eastern Europe may have exacerbated the movements, but they are probably not the cause."

As reported, there have been a lot of discussions recently about what economic policy the European Central Bank (ECB) and the Federal Reserve want to announce in March and whether it will continue with interest rate increases – and if so, how many this year alone.

So where could BTC go from here?

While all this has been discussed, analysts and traders throughout the crypto market and beyond have been keeping a close eye on crypto price movements.

While the market is on the upswing today, Ruud Feltkamp, CEO of Crypto Trading Bot Cryptohopper, said in a comment yesterday that he was "very curious how the Bitcoin price would react to the developments in Ukraine".

Feltkamp’s conclusion is

“I honestly think it’s going pretty well. Regardless of the war, I expected a slight decline anyway, after which another [USD40,000] retest is expected. Whether this will still happen, of course, is the question."

Back to the above correlations, Dr. Amber Ghaddar, co-founder of Chain-Agnostic Protocol AllianceBlock, said that BTC and crypto in general had a high correlation and beta to risky assets in the past year, adding:

"In the current risk-free environment, BTC and crypto have a negative outlook, except for positive idiosyncratic events that could support prices. An increase in Russian military action will continue to put downward pressure on prices."

Regarding what the market should be looking for, Ghaddar noted that movements on the American Nasdaq stock exchange have been "a guiding star" for crypto movements for a year, and stated: "The downward beta for crypto to the Nasdaq is quite high, as we saw again [yesterday] tomorrow, when Nasdaq fell by 2,6% in pre-market trading and BTC by about 6,4% since the US close."

Ghaddar made this comment yesterday during the price cuts. Since then, in addition to the renewed recovery in the crypto markets, there has also been a sharp turnaround in the traditional markets before they closed yesterday, with the Nasdaq Composite Index recording an increase of 3.44%.

According to Mati Greenspan, Bitcoin has been moving in a "very wide range" between a few USD 29,000 and USD 69,000 since the beginning of 2021, while it is now "quite low in this range"." The support is now building around USD 32,000, he says, but adds that he wouldn’t be surprised if it breaks that for a bit.

That is, Greenspan noted,

“But this is the wide range. The way to play a range is usually to buy low and sell high. And if you look at the graph of the last hours, you should be able to see that we are quite low. We are well below our 200-day moving average at this point."

But these things are never certain, and the price could theoretically go down to , he notes – he stressed that, in his opinion, the decline would not be related to the situation in Ukraine, but to those things that "are currently more related to liquidity in the market and the amount of dollars being printed and rising interest rates in the United States" adding:

"These kinds of things are our liquidity zappers."

Experienced trader and technical analyst Peter Brandt suggests that we need to see the next step of the price in order to speculate where it could go from there.

"We need a large volume to clean the last laser eyes. I think sub [USD] 27,000 then I’ll take a look. We could bounce off [USD]

first, we’ll see," Brandt told .

NFTs and Stablecoins in the face of volatile geopolitics

Meanwhile, Amber Ghaddar discussed the most and least vulnerable crypto market segments. Unlike stablecoins, she said, non-fungible tokens (NFTs) should be the least vulnerable.

Since most NFT investors are not traders, but collectors, we can expect two things, she said:

In addition, Ghadder argues that it would be interesting

To keep an eye on

In previous downturns BTC was less volatile than other layer 1s"while Layer 2, with its high beta to Layer 1, would take the grunt of the downward movement," she 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 if Russia takes over BTC?

Meanwhile, there has been some discussion lately that Russia may be turning to crypto, and BTC in particular, in the face of tougher sanctions. How likely this is is up for debate, but what is certain in Greenspan’s opinion is that “we cannot stop Russia from using Bitcoin."
Should you decide to use it, even adopt it in the same or similar way as El Salvador – it would "certainly change things from the point of view of Bitcoin." This would not necessarily be a positive development for the currency. People who are hodl BTC and who are part of the Bitcoin network understand that it is a mechanism for freedom, Greenspan said. So while Bitcoin would remain free, Russia would "make it harder to accept it" with BTC, for example in the US and its financial institutions, which would subsequently be forced to"do a lot more checks before accepting a Bitcoin transaction" that comes from Russia. "That could add a lot of red tape," he said, noting that at the same time the adoption by this big country "would certainly increase the use of Bitcoin.”

There is also the factor of Bitcoin miners in this equation. In particular, the United States and certain states have welcomed Bitcoin and crypto miners who fled the ban in China. "Certainly, if Russia is seriously considering adopting Bitcoin, or if they are forced to do so, then they will also want to increase their hashrate," Greenspan noted. Other players are likely to focus on this, as governments are not necessarily particularly keen on who controls the hashrate – but there is a financial incentive to control it, he said. According to him, there is also a financial incentive for everyone for Bitcoin to remain decentralized once a central authority has too much power within the network.

In his latest newsletter, Greenspan also discusses Ukrainians fleeing the country after the invasion, among other things. He notes that:

“However, those who flee may find it difficult to acquire resources, as massive queues form at gas stations and martial law is imposed on local banks. At the moment, ATMs are operating, but there is a cash withdrawal limit of Ukrainian hryvnia per day (approximately [USD] 3,350 at the current level). As we know, Bitcoin fixes this."

Learn more:

• Bitcoin shows surprising resilience in the face of Russian aggression-Provoked sell-off

• Western allies claim that their targeted Russian sanctions trump a SWIFT ban, as Russian occupiers are near Kiev

• With the start of the war and falling markets, questions about the policies of central banks are multiplying

• Bitcoin, the Ukraine crisis and the dilemma of central banks

• EU is unlikely to push for Russia to withdraw from SWIFT -Diplomats will be removed

• Ukraine invasion: what the West needs to do now