Weekend Pivots for ETH and BTC | Navigator
Review Date: February 25, 2022
Headed into the weekend, we noticed a pivot level in Ethereum that could be a good tool for navigating the market. $2,706 is the level of interest. If ETH is above that level, a strong argument can be made for a bottom. If ETH can’t stay above that level, there is still a downside risk in crypto headed into March. If ETH goes down, $2,534 will be a level to watch.
Data as of 2/25/2022
Past performance is not indicative of the future returns
In Bitcoin, $39,400 seems like a signiﬁcant level. If BTC were to make a sustained move above that level, it would invalidate a bearish chart structure. If BTC falls back below $39,400, there is the risk of moving back down to $33,000.
Bottom line: This week saw an impressive reversal in crypto and equities. Oil also fell, which helped fuel the rally in crypto and risk assets. It did not pay to sell weakness, and it may not pay to buy strength. That said, several negative catalysts loom in March. The CPI inﬂation number is March 10, and the FOMC meeting is March 16. If BTC can not take out $40k, this rally could be an opportunity to move some money into cash (not investment advice). It did not pay to sell weakness, and it may not pay to buy strength.
Geopolitics: Is Taiwan Next?
In last week’s edition of Token Metrics Navigator, we touched on the geopolitical tensions in Eastern Europe between Russia and Ukraine.
This map from CNN highlights the locations of multiple artillery explosions across Ukraine. Explosions have been seen and heard east of Kyiv (Ukraine’s capital), Kharkiv (Ukraine’s second-largest city), Kramatorsk, Dnipro, Mariupol, Odesa, and Zaporizhzhya.
Russia is infamous for its artillery capabilities, ranking #2 overall on the Global Firepower Index (behind the U.S.) and boasting #1 rankings in multiple artillery-based subcategories. Russia may continue to press its advantage from a distance using its artillery capability, creating dramatic TV images of constant explosions.
Aside from the artillery explosions, there have also been reports and sightings of Russian troops entering Ukraine through Belarus via military vehicles. Ground attacks on border units on the Belarus and Crimea-Ukrainian borders. It seems clear that Russian troops will ﬂood into Ukraine and eventually occupy it. Again, this footage will make for dramatic TV images and possibly achieve Putin’s real goal: to create fear, humiliate the West, and “takedown” the U.S. stock market.
President Biden has issued a statement saying that he plans to meet with the other leaders of the G7 Summit to impose “severe sanctions on Russia”. These sanctions have not been speciﬁed, but our concerns from last week are beginning to manifest as Brent Oil Futures have broken $100 per barrel and may move to $114.
Could there be a surprise in Taiwan?
With all eyes on the Russian invasion of Ukraine, this presents an opportunity for China to launch an invasion of its own on Taiwan. China has repeatedly stated that it tends to reunify with Taiwan and this may be the perfect opportunity to strike.
Russia’s invasion of Ukraine has presented China with a strategic dilemma of maintaining the support of Russia while attempting to not further deteriorate its already fragile relationships with the U.S. and EU.
China and Russia agreed to a “no limits” partnership to back each other with standoﬀs in Ukraine and Taiwan as a means to collaborate more against the West. Both countries share strong opposition to NATO expansion and other Western alliances. There is no formal military agreement stated in the partnership documents, but the use of terms such as “no limits” and “no forbidden areas of cooperation” leaves room for the mind to wander on where this partnership could be headed.
China is already equal with the U.S. in terms of economic output and integration in the global economy. China has also placed a large emphasis on improving its military capabilities through naval, airpower, and land warfare capabilities. These improvements coupled with China having the world’s largest population create a signiﬁcant threat to the United States in both military and economic capabilities. It could encourage the Chinese to act while America is distracted.
Bottom line: it seems odd that the markets got caught oﬀ guard when Putin invaded Ukraine. The big surprise may come in March if China takes advantage of the situation and moves into Taiwan. It’s hard to imagine the negative response in capital markets if China moved against Taiwan or if there was an expansion or the conﬂict in Ukraine into other NATO countries. As always, we recommend managing risk accordingly. It is better to prepare for more negative events in March than to be caught off guard.
Should Russia be Kicked Out Of SWIFT?
Europe and the United States have already announced multiple sanctions against Russia after it invaded Ukraine. U.S. President Biden said that penalties against the country will limit access to technology, ﬁnancial markets, and exports, and put certain prohibitions on Russian elites. However, the U.S. and European leaders disagree on whether Russia should be kicked out of the SWIFT ﬁnancial system.
What is SWIFT?
It is a Belgian messaging service that is formally known as the Society for Worldwide Interbank Financial Telecommunications. SWIFT connects more than 11,000 ﬁnancial institutions from over 200 countries around the world.
Why should Russia be kicked from the SWIFT financial system?
Removing a country from the SWIFT ﬁnancial system is seen as a “nuclear option” as it is one of the most aggressive sanctions that can be placed on a country. This would not only damage Russia’s economy in the short term but also damage it in the long term as Russia would be cut oﬀ from a multitude of international ﬁnancial transactions. This includes international proﬁts from oil and gas production which are more than 40% of Russia’s revenue.
Why are certain countries against removing Russia from SWIFT?
Removing Russia would have costly implications for not just Russia. Many countries are dependent on Russia for its energy, wheat, and other commodities. This has led to a reluctance among European leaders as they are worried that it may cause energy shortages and make doing business with Russia more costly and complicated.
Bottom line: sanctions experts believe that SWIFT is an overhyped tool and cutting Russia’s access to it could backﬁre. It would force Russia to ﬁnd alternative ways of conducting international transactions such as forging stronger ties with China or developing a digital currency.
Anonymous NFT Collector “Rug Pulls” Sotheby’s
On Wednesday evening, Sotheby’s canceled its much-anticipated auction of 104 CryptoPunks, as the bid was withdrawn. This collection was expected to be sold for up to $30 million. The lot, which Sotheby’s titled “Punk It!,” was ﬁrst acquired by collector “0x650d” back in July 2021 through a single $7 million transaction.
The news of the withdrawal was made in the crowded auction room around 20 minutes after the bidding was scheduled to commence. Shortly after, 0x650d tweeted, “nvm, decided to hodl” in a reply to their original tweet from February 8th announcing the sale of their CryptoPunks. Many people presumed this was due to the single-lot auction not having enough bidders who were willing to pay their asking price.
Many people were upset by the actions of 0x650d and rather than taking responsibility or apologizing, they posted a meme where they claim to take “punks mainstream by rugging Sotheby’s.”
Bottom line: whether 0x650d had planned on dropping out of the auction from the start or was just disappointed by the lack of bidders, these actions should not be condoned. It is disrespectful to Sotheby’s and makes the entire NFT industry look bad. For NFTs to be accepted by the mainstream and achieve some status beyond “goofy JPEGs,” these kinds of instances can’t occur.
First 100% On-Chain and 100% Customizable NFT Collection
METAKAYS, a collection of 8,888 pixelated NFTs, was minted on Tuesday and sold out in under two hours. Why was there so much hype about this project that Zeneca.eth was tweeting about it, you ask? It is because MEATKAYS is the ﬁrst fully customizable and fully on-chain NFT project ever.
When minted, the NFTs look like the image on the left. Once the NFT is in the owner’s wallet, there are 88 billion unique combinations to be created. Holders can even type up to eight letters on their METAKAY’s chest. Owners have the choice to stop customizing their NFT forever by applying a FINALITY condition.
Clever investors in the METAKAYS Discord noticed that not only did Zeneca.eth tweet about the project, but he aped in as well. Checking Etherscan revealed that Zeneca.eth purchased 150 NFTs from the collection.
Zeneca.eth tweeted, “They got me with all the buzz words to tug on my heart strings: cc0, 100% on-chain, fully customizable and interactive mint experience.” cc0 gives holders to use their NFTs as they wish, including to build derivative projects.
Bottom Line: METAKAYS scored a 67% using our fundamental rubric, mainly because it has an anonymous team and a smaller Discord community. Nevertheless, we think this project has potential because it is the ﬁrst of its kind. From here, we need to see the team deliver on their promise of building a cross-chain metaverse and DAO.
*Disclosure: the author of this report owns a METAKAYS NFT
Fab 5 – Top 5 Tweets of the Week
Crypto Twitter personalities went out of their way to ensure market participants kept the recent market decline in perspective.
Bitboy is talking about China and Taiwan.
The Fed can not stop the price of food or energy from moving higher in this environment. The Fed’s best bet may be to raise the Fed Funds Rate and continue to support capital markets with QE. This could cushion any decline in crypto.
Expect crypto to become a part of the conversation on sanctions. Some may condemn crypto, claiming it helps big countries avoid sanctions. We have to be careful about western regulators making anti-crypto comments using the “sanctions excuse.” The reality is that crypto will probably help citizens overseas if the ﬂow of USD is disrupted.
- https://www.coindesk.com/business/2022/02/24/sothebys-withdraws-lot-of-104-cryptopunks-minut es-before-expected-auction/
- https://www.usatoday.com/story/money/2022/02/24/swift-russia-banking-system-sanctions/69309 31001/