Crypto pulls back on geopolitical uncertainty | BetaShares

Crypto pulls back on geopolitical uncertainty

BY Justin Arzadon | 22 February 2022

The bitcoin price fell below US$40K for the first time in over two weeks, with fears that Russia will invade Ukraine causing concern across equity and crypto markets. Bitcoin started the week well, but ended up falling into the weekend, hitting a low of $38,7999 where it stands at the time of writing.

Ether’s price action was no better, down 9.35% in the last seven days vs bitcoin’s -8.45%, the largest drop in over four weeks.

Bitcoin’s market cap dropped to $736.4.B, market dominance is sitting at 42.12%, and the value of the entire crypto market is $2T.

Price High Low Change from previous week
BTC (in US$) $38,799 $44,667 $38,799 -8.45%
ETH (in US$) $2,647 $3,185 $2,647 -9.35%

Source: CoinMarketCap. As at 20 February 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.

News we are keeping an eye on 

Conoco Phillips, one of the largest oil and gas companies in the world, is indirectly getting involved in bitcoin mining and helping reduce carbon emissions in the process. In North Dakota, a bitcoin pilot project is in operation, which involves selling natural gas to bitcoin miners that otherwise would have been stranded and burned (also known as ‘flaring’). Instead of burning off the ‘wasted’ natural gas, which is harmful to the environment, it monetises the gas by selling it to a bitcoin miner enabling them to access cheap energy that would have been wasted and could be considered a more sustainable energy source. Conoco Phillips has an initiative to “reduce routine flaring, or burning off extra gas, to zero by 2030”1 and the push into bitcoin mining is a big step in helping them achieve this.

Warren Buffet once referred to bitcoin as “rat poison squared” and although he has not publicly changed his stance, his firm, Berkshire Hathaway, has been selling some of its Visa and Mastercard positions in favour of crypto-friendly bank, Nubank. 2 The largest Brazilian fintech bank, Nubank does not directly allow investing in cryptocurrencies, however its investment unit NuInvest does3. NuInvest offers eight different crypto ETFs listed on the B3 stock exchange, the second-oldest exchange in Brazil, giving Berkshire indirect exposure to the growth potential of cryptocurrencies and bitcoin. Revealed in an SEC filing earlier this week, Berkshire Hathaway purchased $1B in shares of Nubank in the fourth quarter of 2021. This follows an initial investment of $500 million last July, months before the company went public.

Companies such as Nike, Adidas and Samsung have already announced plans to open in the Metaverse, but it appears that JP Morgan will be the first bank to do so. JP Morgan announced the opening of Onyx lounge where it will be offering Ethereum permission-based services in the popular Metaverse game, Decentraland. JP Morgan also released a white paper, which the bank’s head of crypto said would “help clients cut through the noise and highlight what the current reality is, and what needs to be built next in technology, commercial infrastructure, privacy/identity and workforce, in order to maximise the full potential of our lives in the metaverse.”4

On-chain metrics

Bitcoin: Entity-adjusted Dormancy Flow  is the ratio of the current market capitalisation to the annualised dormancy value (which itself is a measure of how long, on average, coins are remaining dormant, or unmoved). This gives a gauge of how many old coins are being spent relative to the recent overall trend and can be used to help time market lows and assess whether Bitcoin is in a bullish or bearish primary trend.

Looking at data from on-chain analytics company Glassnode, the ratio is sitting near the lower extreme of where it has historically oscillated, at levels not seen since the 2021 lows, and prior to that in April 2020, just before the most recent bull-run started. Historically, prices have tended to rally when the Entity-adjust Dormancy Flow has dropped to these levels.

entity adjusted dormancy flowsSource: Glassnode.

The Lightning Network is a “layer-2 payment protocol” layered on top of a blockchain-based cryptocurrency such as bitcoin. It is intended to enable fast transactions among participating nodes and has been proposed as a solution to the bitcoin scalability problem.

Bitcoin: Lightning Network Number of Nodes  has steadily continued to increase, with only a few minor dips along the way, since the Bitcoin price bottomed last July, and recently set a new all-time high. This is encouraging, as the more nodes that come online on the Lightning Network and capacity increases, the more products and services can be built on top of Lightning.

Lightning number of nodesSource: Glassnode.

Altcoin news

The average transaction fee for Ethereum (ETH), known for its high fees, has come down dramatically over the last month. According to data from Blockchair, the average transaction fee of ETH on 10 January was $53.03, and peaked at $70.83 back in May 2021. Within a month, the average fee fell ~73%, to be $14.17 on 13 February. Transaction count on the network has also declined to levels last seen in early 2019. Blockchair data shows that on Feb. 1, Ethereum’s transaction count was 14,574,808 down from 36,851,128, or 60.44% in one month. This is the largest drop in 30 days in ETH’s history.5

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.



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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