Crypto Weekly: Rebounding from a setback
Summary: The crypto market has been on a two-week-long rebound with Bitcoin now trading at its year open and Ethereum nearing its open. The surge has likely been caused by an increased risk appetite and positive regulatory development. However, the global unrest, particularly the invasion of Ukraine, can quickly turn things around. Speaking of Ukraine, the country is about to launch a non-fungible tokens (NFTs) series.
Rebounding to this year’s open
Since December last year, the crypto market has to a large degree been driven by the same events as the equity market, particularly technology and growth stocks. In our view, there has been a general altered sentiment on notably more risky assets, such as technology stocks and cryptocurrencies, where investors have substituted a part of their high-risk assets with less risky assets, leading to a tumbling crypto market from its all-time high total market capitalization back in November. Further, upon the increased global unrest - particularly fueled by the invasion of Ukraine - cryptocurrencies do not seem to be the safe haven as hoped by those in the crypto community who called Bitcoin a digital analogy to gold. Instead, the crypto market has performed poorly in times of increased global unrest.
Because the broader market risk sentiment and the global uncertainties have arguably firmly impacted the crypto market lately, these topics should reasonably be top of mind for investors looking at short-term moves in the crypto market. Since mid-March, many growth stocks have partially recovered from their setbacks. Ark Innovation ETF is, for instance, up from a low of $52.5 in mid-March to a present price of $64.50. This emphasizes that the former risk appetite of the market is somewhat returning. For now, the crypto market seems to benefit, with Bitcoin having returned to its year open price, while Ethereum is still closing in. However, whether this rising risk appetite is sustainable more long-term largely depends on the global unrest namely the invasion of Ukraine, and which consequences it will have long-term.
With respect to uncertainties but this time exclusive to the crypto market, particularly over the past month, the market has been gifted with positive progress within the regulatory arena. With the latter being one of the greatest uncertainties within crypto, regulatory clarity is essential for the space to evolve further. Earlier in March, US President Biden signed an executive order to explore the regulation of cryptocurrencies. The order was, however, rather positive, as it focused a lot on supporting innovation. Some days after, the European Union parliament voted on a proposed rule that would fundamentally ban cryptocurrencies using the proof-of-work consensus protocol used in Bitcoin and for now, Ethereum due to environmental concerns. The EU parliament voted 30-23 in favor of rejecting the rule. US Treasury Secretary and former Chair of the Federal Reserve Janet Yellen commented last week on crypto: "I have a little bit of skepticism because I think there are valid concerns about it. Some have to do with financial stability, consumer/investor protection, use for illicit transactions, and other things. On the other hand, there are benefits from crypto, and we recognize that innovation in the payment system can be a healthy thing." The latter is truly interesting, as Yellen has been vastly skeptical about crypto. It may call for a more positive future view on crypto by Yellen.
The government of Ukraine to launch non-fungible tokens (NFTs)
Shortly after the invasion of Ukraine in late February, the Ukrainian government publicly asked for donations in Bitcoin, Ether, and other Ethereum-based tokens such as the stablecoin USDT to fund its defense. Disclosed last week, on the 30th of March, the Ukrainian government will launch a non-fungible tokens (NFTs) series. On the face of it, the series will consist of 54 NFTs, individually portraying key moments in the early days of the invasion between the 24th to the 26th of February. The Ukrainian government states in the NFT series; “We will never let any single day of this period disappear from the ledger of world history.” The funds in full raised from the NFT sale will go to the official crypto account of the Ministry of Digital Transformation of Ukraine to financially support the country.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.