Russia’s invasion of Ukraine continues, and so do the discussions on how the worsening geopolitical, economic, and social factors may affect pretty much all segments of the wider society. Two crypto exchanges shared their views with Cryptonews.com on what may await the crypto market, and what segments are the most threatened.
Although the recent escalation has tanked most risk-on assets, crypto included, the situation between Russia and Ukraine has been developing and escalating for a while.
“The ongoing decline in crypto prices suggests much of its potential fallout has already been priced into the market,” said Rick Delaney, Senior Analyst at OKX Insights, crypto exchange OKEx’s crypto market analysis team.
However, he noted that a sudden recovery is “unlikely” as investors wait to see how the US central bank, the Federal Reserve, will adjust interest rates in light of recent geopolitical developments. Even longer term, we could expect to see “little changes fundamentally about crypto as an asset class,” he added.
Meanwhile, the aggressor may be using bitcoin (BTC) in light of the sanctions imposed upon it, while Ukraine is asking for donations in BTC, ethereum (ETH), and tether (USDT).
Brandon Dalmann, Chief Marketing Officer at the Unizen exchange, told Cryptonews.com that we saw crypto markets reacting positively “with the Russian military operation because the Russian government will leverage BTC to de-risk their financial system from the impact of the sanctions.”
Dalmann too said that the eyes seem to be on the Fed now, stating that in the medium term, the market will price in the Fed rate hike accordingly. “The industry is facing an industry-wide litmus test, where weak projects will be sidelined in favor of startups with sustainable business models and capital structure will shine in the months to come,” he said.
As to the indicators that may suggest what’s coming next, Dalman said that:
- monitoring Digital Asset Inflows/Outflows by institutions will help in determining the trend, given that the industry has matured to the point where institutions are actively transacting;
- monitoring exchange deposits for BTC and stablecoins can time the selloffs (whales depositing BTC on exchanges) and rallies (whales moving stablecoins to buy).
Delaney shared two more suggestions:
- The Relative Strength Index (RSI) can be useful for identifying trend reversals, traders and investors can look out for the indicator to enter oversold territory; this happened at the mid-January price reversal, resulting in some three weeks of BTC upside.
- Volume analysis can provide actionable insights; waning volume may indicate that a trend is almost exhausted and a reversal is imminent.
Yet, not all crypto industry segments are built the same, and it stands to argue that some would be more vulnerable in times of geopolitical and economic uncertainty than others.
Dalmann noted that, due to last year’s Financial Action Task Force (FATF) updated guidance on AML/KYC (anti-money laundering/know-your-customers), decentralized finance (DeFi) “will be under severe threat.” He said that, DeFi is “now stepping directly into core financial industries like Fixed Income and Derivatives which have sectoral valuation in trillions” – and regulators will not like an industry that is “growing rapidly without safeguards to protect the end-user.”
Meanwhile, Delaney added that,
“With BTC largely viewed as crypto’s safest bet, one would expect to see it outperform the generally more speculative altcoins during a period of widespread derisking. The same is true for the DeFi and NFT niches, which are still largely driven by speculation alone.”