Emerging Market Themes Worth Knowing About | Navigator
Review Date: March 3, 2022
Data as of 3/4/2022 – Past performance not indicative of future returns
The Dollar Index (DXY) is breaking out of an expanding range formation. Breakouts like this can be extremely bullish for the dollar. One of the reasons DXY is rising is that the Euro is falling sharply because big European banks have lending exposure to Russian companies. Because of the sanctions, Russian companies may have a hard time servicing debit. If DXY continues to its technical target at 101, that could halt the advance in Bitcoin. If Bitcoin does not decline below $40,000 and just sits in a range, that could allow certain altcoins to rally.
ThorChain (RUNE) may be breaking out. A weekly close above 5.05 could confirm a change in trend in favor of the bulls. If RUNE can not hold above $5.05, then the rally may fizzle. Money from the legacy world may start to flood into the DeFi space. This could create rallies in select altcoins.
Cosmos (ATOM) is moving through resistance. If ATOM can hold above $33.50, then Cosmos can continue to outperform the market. If ATOM does not hold above $33.50, then ATOM may consolidate or decline.
If NEAR can rally above 12, that could trigger a breakout above a key level of $12.24. A move above that level could turn the technical picture bullish. Zooming out, NEAR may be at the bottom of a bullish accumulation cone. So if NEAR is above $12.24, and the crypto market holds together, there is a chance NEAR could outperform.
While there are altcoins that have potentially positive technical pictures, we wanted to provide an indicator that would serve as an early warning of a decline in stocks and crypto. VIX is the index of fear in equities. If VIX stays above 33, then a much larger move higher could unfold. This may or may not happen in the coming week, but we think VIX should be on any watchlist for altcoin investors.
Bottom line: In the best-case scenario we could see Bitcoin being in a range. That could let altcoins like RUNE, ATOM, and NEAR move higher. Even if you intend to hold the altcoin of your choice longer-term, stop-loss orders are a way to prevent big losses in the event the crypto market suddenly declines.
Recapping Crypto’s Role In The War
As a means of weakening Russia without military force, the US and EU have begun enforcing strict economic sanctions on Russia. These sanctions are being used as a means of isolating Russia’s economy from the rest of the world. Recently, the US, EU, UK, and Canada banned certain Russian banks from using SWIFT (the high-security network that facilitates payments between roughly 11,000 financial institutions in 200 countries).
These sanctions as well as Russia’s debt and credit ratings being slashed to “junk” by Moody’s and Fitch Ratings have sent the Ruble into a freefall.
Data as of 3/3/2002 – Past performance not indicative of future returns
The ruble fell to an all-time low against the dollar (117.4 RUB/USD) and Euro (125.1 RUB/EUR) forming a technical pattern known as “the bowling ball thrown out of a window pattern.”
In the midst of the Ruble plummeting, Russian citizens are turning to crypto as a means of preserving their capital and purchasing power. Several Ukrainian officials, including Ukraine’s Deputy Prime Minister Mykhailo Fedorov, asked major crypto exchanges to restrict the accounts of all Russian users, not just those linked to Russian and Belarusian politicians.
Many of the world’s largest crypto exchanges such as Binance, Coinbase, and Kraken have rejected Ukraine’s plea to bar all Russian users from using their platforms. However, they have agreed to restrict accounts of users that are listed on the sanctions list and are actively screening for these individuals and institutions. Officials from these platforms have stated that restricting all Russian users’ access is unethical and goes against the fundamental ethos of Bitcoin and cryptocurrency.
The conflict has begun being referred to as “the world’s first crypto war” because of the two opposing viewpoints towards crypto. One on hand, Ukraine has raised nearly $55 million in cryptocurrency from approximately 102,000 donations in support of the military and defense effort. But on the other hand, Washington and US regulators are calling on major crypto exchanges to restrict Russian users from using crypto exchanges as a means of avoiding the strict economic sanctions.
Bottom line: It is still unknown whether or not the Russian individuals being targeted by sanctions are using cryptocurrency as a workaround, but there is significant data showing that capital is flowing out of the ruble and into crypto at a rapid rate.
Crypto Being Used to Support Ukraine
The DAO’s most prominent member is Nadezhda (Nadya) Tolokonnikova of the Russian feminist punk rock band Pussy Riot. Tolokonnikova and two of her bandmates spent two years in a Russian prison from 2012 to 2014 for “hooliganism motivated by religious hatred,” after performing the song “Punk Prayer” in a Moscow cathedral.
Sales of NFTs through the Ukraine DAO are not the only movements materializing to support Ukraine during its conflict. The Ukrainian government’s official Twitter account revealed Wednesday that it would be accepting Bitcoin (BTC), Ethereum (ETH), and Tether (USDT) donations, posting their official public addresses in the tweet.
At the request of Polkadot co-founder Gavin Wood, Ukraine added Polkadot donations, and Wood, the former Ethereum co-founder, donated $5 million worth of DOT. And for the sake of a good meme, Ukrainian officials decided to allow donations to an official DOGE wallet.
To date, the Ukrainian government has successfully obtained over $30 million worth of cryptocurrency donations. This amount pales compared to the hundreds of millions Ukraine has received from the EU and United States. However, there is one unprecedented takeaway from this new kind of global evangelism through digital assets.
On Wednesday, the government announced that anyone who donated would receive an airdrop. News of the airdrop led many around the internet to regard this as the first crypto “war bond.” Limited information has been made public about this airdrop to this point.
Bottom Line: Crypto is becoming a tool for people to give what they can to efforts they care about without wire transfer delays and fees extracted by greedy middlemen. While the $30 million received in crypto is dwarfed by the $270 million Ukraine has sold in traditional war bonds, this airdrop is proof that crypto crowdfunding is worthy of the global stage.
5 Best Tweets of the Week
Wall Street investment banks now suspect oil can head to $185 by the summer. Higher oil prices could eventually drag stocks down. While dramatically higher oil prices may create a bid for crypto in the short term, rising oil may drag all risk assets lower in April and May.
Fed chairman Jay Powell is determined to fight inflation. We are inclined to take this seriously. Even though interest rates have been falling as legacy investors buy US bonds as a haven from financial distress in Europe, the Fed may print less and less money to stop inflation from spiraling out of control. This could be a negative for crypto in April and May.
This tweet refers to the S&P GSCI Index. GSCI stands for Goldman Sachs Commodity Index. So this graph is tracking the price of a basket of commodities. It’s not directly stated here, but grains like wheat and corn have been rising along with oil. Since crypto is a digital commodity, this may create demand for Bitcoin and Ethereum in the short term. If GSCI rallies to a new all-time high, that could create a decline in risk assets that would impact crypto. It makes sense to be tracking U.S Crude Oil (CL1), Brent Crude Oil (BR1), and CBOT Wheat (ZW1).
This week featured the idea of Ukrainian authorities promoting and canceling an air rop to people who donated to their cause. The Ukrainian government, according to this tweet, is also considering launching NFTs. The tweet highlights the forces that underpin crypto in the short term. As long as stocks do not go down, crypto may have two weeks to rally and really shine as a beacon of hope for humanity
There are two takeaways from this tweet. With the massive devaluation of the ruble, the world has seen what can happen when a fiat currency collapses and the people are left scrambling to protect their purchasing power. Indirectly, the current geopolitical scenario speaks to what Satoshi Nakamoto had in mind when he wrote the bitcoin whitepaper. Further distress in the fiat currency market could help crypto in the short term. The second takeaway involves contrarian theory. After the 15% rise in bitcoin, crypto Twitter influencers have returned to putting laser beam eyes on their profile pictures. The last time laser beam eyes were persuasive on crypto Twitter profile pictures was the Bitcoin top in 2021.
Sources:
- https://etherscan.io/address/0x633b7218644b83d57d90e7299039ebab19698e9c
- https://finance.yahoo.com/news/why-some-say-russia-ukraine-conflict-turns-crypto-transactions-int o-game-changer-191231355.html
- https://www.ukrainedao.love/
- https://twitter.com/carlquintanilla/status/1499446553848823815?s=20&t=ua9Kq0QH1NGZ9F2VeyZmew
- https://twitter.com/KathyJones/status/1499422455969968130?s=20&t=aCr8koEifOCWTSm81vCELQ
- https://twitter.com/biancoresearch/status/1499393406208032769?s=20&t=aCr8koEifOCWTSm81vCELQ
- https://twitter.com/CharlieShrem/status/1499419368752435205?s=20&t=aCr8koEifOCWTSm81vCELQ
- https://twitter.com/APompliano/status/1499218085882040323?s=20&t=aCr8koEifOCWTSm81vCELQ
