Will they, won’t they?
Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
It’s been another week of anxious anticipation for investors across global markets, as the ever-growing threat of a Russia-Ukraine war looms large. Aggressive posturing from the United States has seen conflicting intelligence reports flood mainstream media, prompting waves of volatility as onlookers await resolution to a conflict that could carry global ramifications. As inflation continues to observe historical highs, most recently in the United Kingdom, many participants are bracing for the possibility of a black swan event akin to March 2020’s infamous Covid crash.
An existential tug-of-war
Despite external uncertainty, BTC has maintained its grasp on $42k support, propelled in part by continued institutional adoption and last Sunday’s Superbowl, which featured a slew of adverts from global crypto exchanges. Having rejected $46k resistance, however, the leading cryptocurrency finds itself sandwiched between the two levels, with upswings and downturns still largely dictated by conflicting war narratives. Monday’s bounce off $42k support came in the face of announcements by Vladimir Putin that Russia would withdraw troops following “routine drills” at the Ukrainian border. The momentum abruptly shifted, however, as Russia’s unexpected deployment of a further 7000 troops to the contentious region saw BTC shed almost 5% on Thursday, retracing from $44k to $42k in a matter of hours.
Technicals
While it holds true that the present air of tension has influenced market movement, analysts may argue that bitcoin has been due for a period of consolidation, having surged from $33k lows to the brink of $46k with little in the way of correction. Further, BTC’s break above $42k has seen it regain the 50-day moving average (50MA) as support, with recent downturns confirming this reversal and potentially providing a more substantial foundation for further upwards momentum.
BTC continues to straddle both the 50MA and $42k support
From a broader perspective, BTC dominance has maintained a steady, if muted, uptick since the start of 2022, wrestling its way from a historically rare sub-40% market share to 42.5% at the time of writing. In tandem with BTC’s rising share, ETH’s share of the industry once again dropped below 20%, with the bulk of altcoins following suit. Typically, a bullish divergence for BTC dominance evidences a lower risk appetite in the digital assets market, as investors seek shelter from high-volatility bets by allocating funds back to bitcoin. Similar patterns were observed during mid-2021’s retracement, as well as the tail-end of 2017’s market-wide blow off top.
Security in the time of fiat
As tensions heighten due to increasingly expensive living costs and the impending threat of a large-scale conflict, it’s likely that investors continue to derisk positions to protect their holdings. The grand question remains - where?
Since the start of February, gold has seen consistent gains, yielding 5% returns this month alone as the safe-haven asset grazes $1900/oz. However, that’s not to say interest in crypto has declined by any means. Warren Buffett, who once referred to cryptocurrency as “worse than rat poison”, has finally capitulated, disclosing billion-dollar holdings in a crypto firm.
Meanwhile, Canadian Prime Minister Justin Trudaeu’s decision to freeze the bank accounts of those involved in ongoing anti-mandate protests in the country has brought a worrying reality into stark relief - seizure of fiat is possible and easily enacted under executive orders. In light of Trudeau’s contentious decision, Canadians sought to withdraw funds from banks across the country, only to find that many were unable to provide the requested services. As #BankRun continues to trend, individuals seeking to protect their assets may seek to store them on a distributed network that is both immutable and cryptographically secure, and speaks to an ethos of individual sovereignty.
Canada’s ongoing crisis is a visceral example of the consequences of a financial system backed only by debt, and while unfortunate, it is but one of many instances of governments controlling the flow of funds through force or other means.
“Not your keys, not your crypto” is a popular principle in the industry, but perhaps “not your vault, not your fiat” deserves a bit more attention.