Crypto in the face of war | BetaShares %

Crypto in the face of war

BY Justin Arzadon | 8 March 2022
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Bitcoin started the week strongly adding over 14.5% which was the largest daily gain since 8 February 2021, and managing to breach the US$45K level, but failed to hang onto most of the gains into the weekend. Bitcoin is trading at $39,523 at the time of writing.

Ether’s price action lagged, down -2.31%% vs bitcoin’s 2.33% over the last seven days.

Bitcoin’s market cap sits at $750B, market dominance is up to 42.27%, and the entire crypto market is valued at $1.78T.

 

Price High Low Change from previous week
BTC (in US$) $39,523 $45,077 $37,268 2.33%
ETH (in US$) $2,651 $3,029 $2,596 -2.31%

Source: CoinMarketCap. As at 06 March 2022. Past performance is not indicative of future performance. Performance is shown in U.S. dollars and does not take into account any USD/AUD currency movements.

Source: Glassnode.

News we are keeping an eye on 

Since the invasion of Ukraine on 24 February, the country has managed to raise over US$54.7 million in crypto donations as of 3 March. The Ukraine’s prime minister posted a plea for donations in bitcoin, ether or tether through Telegram and his personal Twitter account, followed by appeals on Twitter accounts belonging to the Ukrainian government. The money has been used to buy critical supplies like drones, bulletproof vests, heat-sensitive goggles and gasoline, from both state actors and the private sector. The crypto community has stood behind the Ukraine with sizeable donations of $5.8 million from Gavin Wood, the founder of a cryptocurrency called Polkadot1, and a pledge from the world’s largest crypto exchange Binance, to donate at least $10 million to humanitarian efforts addressing the growing refugee problem2.

The vice prime minister of Ukraine asked all major crypto exchanges, through a Tweet, to block addresses of Russian users, however major exchanges Binance, Coinbase and Kraken all rejected the request of a complete ban, citing ‘financial freedom’, and have allowed ordinary Russian users to continue to access. Although exchanges will comply with government sanctions and block accounts of specific individuals who are affected by the sanctions, Coinbase Chief Executive Officer, Brian Armstrong, said in a series of tweets on Friday: “We believe everyone deserves access to basic financial services unless the law says otherwise”, and a spokesperson for Binance said in an emailed statement to Reuters: “We are not going to unilaterally freeze millions of innocent users’ accounts. Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists.”3

Speculation that Russia may be able to evade financial sanctions using cryptocurrency is false according to experts. Although bitcoin and other cryptocurrencies are decentralised, borderless and do not have a central authority to block transactions, crypto markets are still relatively small and transactions are traceable through the blockchain. It may be viable for individual users to work around sanctions on Russia, though evading personal sanctions may be more difficult. Russia’s most critical state-owned enterprises are estimated to be worth nearly $1.4 trillion, and the entire crypto market is currently valued at $1.8T. According to Yaya Fanusie, a fellow at the Centre for a New American Security who assesses national security and money laundering risks related to digital assets: “The size and scale of crypto markets — and their state of liquidity — is not sufficient to offset what happens from banking disruptions and other disruptions from sanctions.”4

On-chain metrics

Bitcoin: Percent Balance on Exchanges measures the percent supply held on exchange addresses. The trend can indicate the sentiment of investors, rising when sentiment is bearish and declining when investors are more inclined to hold for the longer term.

Looking at data from on-chain analytics company Glassnode, the current geopolitical tensions and price pressure have not increased supply onto exchanges. The current percentage on exchanges has continued to decline since March, 2020 and sits at a level not seen since April, 2018.

Source: Glassnode.

Bitcoin: Percent Supply in Profit looks at the percentage of circulating supply in profit i.e. the percentage of existing coins whose price at the time they last moved was lower than the current price. This metric can potentially help identify market tops and bottoms, where historically a figure above 95% has coincided with market tops and below 50% coincided with market bottoms and attractive entry points.

Bitcoin: Percent Supply in Profit has declined to 66.74%. It lies in the middle of the range compared to historical market tops and bottoms, indicating that the price may have significantly more room to move either way before there is any real sentiment of investor capitulation or euphoria.

Source: Glassnode.

Altcoin news

Tether (USDT) is an Ethereum token that is pegged to the value of the U.S. dollar and is known as a stablecoin. USDT is currently the largest stablecoin with a market cap of  $79.7 billion. Last week, trading volume in USDT was 519% above the average for this year, and according to blockchain research firm Arcane Research, the USDT/RUB (Tether/Russian ruble) trading volume on Monday broke a new record with $34.94 million.5 According to its website, USDT is the most widely adopted stablecoin, having pioneered the concept in the digital token space. A disruptor to the conventional financial system and a trailblazer in the digital use of traditional currencies, Tether Tokens support and empower growing ventures and innovation throughout the blockchain space.6

Investing in crypto assets or companies servicing crypto-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto-asset markets.

Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment.

Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.


1. https://www.cnbc.com/2022/03/03/ukraine-raises-54-million-as-bitcoin-donations-surge-amid-russian-war.html

2. https://cointelegraph.com/news/crypto-exchanges-consider-ukraine-s-call-to-freeze-russians-bitcoin

3. https://www.reuters.com/technology/coinbase-not-banning-russians-using-platform-ceo-says-2022-03-04/

4. https://www.cnbc.com/2022/03/02/bitcoin-sanctions-could-be-next-as-doj-unveils-crypto-crackdown-plans.html

5. https://www.vice.com/en/article/4awb9m/russians-are-piling-into-crypto-amid-financial-sanctions-data-show
6. https://tether.to/en/


Off the Chain will be published every Tuesday, and provide the latest news on bitcoin and the rest of the crypto market along with analysis and insights into the world of crypto.

It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.

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