As demand rises due to the war, Bitcoin gains traction; Cryptos are caught in a Catch-22 situation

March

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The European war appears to be driving Bitcoin and the overall cryptocurrency market. It will depend on whether the need materializes when the danger has passed and how legislative forces play out.

Bitcoin was selling and buying at roughly $41,200 on Friday, down 2% from earlier. Nevertheless, it had launched a remarkable comeback, jumping about 20% from $35,000 after Russian forces invaded Ukraine the week before.

The broader cryptocurrency market has also restored some of its losses from previously this year. Ether, the second-largest cryptocurrency, has grown 20% to $2,830 since last week. Stable coins—tokens that attempt to sustain an enduring value with reserve asset backing—appear in high demand. Terra, a token that backs “algorithmic” stablecoins on the Terra blockchain network, has increased by 80% since the attack, bringing its market cap to $33 billion in a clue of crypto dollar demand.

 Bitcoin has cracked over a few technical resistance levels or obstacles to further growth. According to data from Fairlead Strategies, the cryptocurrency has passed over its 50-day moving average for the first time since November. Crossing back over the 200-day moving average near $48,000 would be the next barrier, which might set it up for more excellent moves.

In a report on Thursday, Katie Stockton, founder and managing partner of Fairlead, claimed, “The breakout…puts the next big barrier on the chart in the $50,000 to $51,000 zone.”

The driver for crypto appears to be fresh optimism that it would find real-world applications as an alternative to sovereign currencies beyond trading. As government-backed currencies like the Russian ruble fail, war and geopolitical turmoil in Europe may be fuelling the desire for tokens, the theory goes. And after the crisis, there may be a greater structural need for crypto as a worldwide asset.

In a post released on Thursday, Fundstrat Global’s head of digital asset strategy, Sean Farrell, said, “The public was ultimately pushed to embrace Bitcoin as a catalyst for financial liberty and censorship resistance.”

Bitcoin is also gaining a foothold as stocks lose support, reversing a close link between the two asset classes before the Ukraine crisis. According to Bloomberg Intelligence commodities strategist Mike McGlone, despite being five times more volatile than stocks (over a 260-day average), Bitcoin was down less than half of the S& P 500’s 10% drop through the first two months of 2022.

He reveals that Bitcoin and other cryptocurrencies could be the digital commodities of the coming, overtaking traditional commodities like oil in terms of returns. An increase in oil prices will finally lead to increased production, increasing supply and driving the price down. In 2023, he forecasts a 13 percent excess in global oil supplies overconsumption, with prices moving lower as the crisis subsides.

“The basic line for many of these commodities is that higher prices stifle demand while increasing supply,” he argues, “but the opposite may be true in Bitcoin.” “Over 17,000 crypto desire tobes have been motivated by competition, but Bitcoin, Ethereum, and crypto dollars are the most enduring survivors.”

None of this is ensured, particularly as governments become concerned that crypto might be used to dodge sanctions and bypass the international monetary system by governments, companies, and individuals.

Cryptocurrency does confront a Catch-22 situation. As it gains momentum, its anonymity and borderless characteristics may pose a challenge to national financial controls, provoking calls to prohibit, tax, or heavily limit its use.

Crypto is also being analyzed more extensively beyond the United States, as the Russian situation exposes its potential for fraudulent transactions. President of the European Central Bank Christine Lagarde stated this week that the European Union should approve a regulatory framework for cryptocurrency as soon as possible, mainly to prevent Russia from using it to avoid sanctions.

None of this precludes cryptocurrencies from thriving in the face of much stricter global rules. They may not appear to be as “permissionless” as their proponents like.

About the author, Awi Khan

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