Economic Sanctions – Bitcoin And Crypto Impact

Economic Sanctions – Bitcoin And Crypto Impact

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2022-05-10 01:43:21

Market situation

Over the past day, Bitcoin has rallied slightly after falling to the previous low of $36,000. Altcoins are also slightly up and the market is more bullish in the green.

The US stock market fell after opening on news of tensions between Russia and Ukraine.

A statistics of Sentiment on social network index. The report was released about the low number of users using the word “buying the dip” during this drop. Two possible reasons for this are that the word is deprecated by users or the market investor is getting bored and giving up. If investors are getting bored and capitulating, this is skepticism for the next cycle (according to the market sentiment chart).

The price drop also caused the BTC profit rate to drop to 65%. The Fear and Greed Index shows that market sentiment is fearful (25).

On-chain indicators show that as prices fall, retail investors are cutting their losses. The Short term Hodler SOPR shows this clearly when the index is below 1. Long term investors have not shown any sign of taking profits.

The stock market and also the crypto market are still affected by two main current issues.

Political tension between Russia and Ukraine

Russian President Putin has ordered troops into two breakaway regions in eastern Ukraine after announcing on Monday night that he would recognize their independence. Although this region belongs to Ukraine, but due to previous disputes, the two groups of armies established themselves and called themselves the Luhansk republic and the Donetsk republic. These two units sided with Russia, although not officially said to belong to Russia.

Mr. Putin unexpectedly recognized these two regions as autonomous regions and recognized their independence. For this reason, Russia sent troops into these two lands on the pretext of protecting the people of these two autonomous regions. If Ukraine opens fire on this land first, it will be considered a move to break the Minsk agreements and war will break out. This is said to be Putin’s strategy to prevent Ukraine from joining NATO.

US President Joe Biden said that Russia had begun “an invasion” into Ukraine and announced sweeping sanctions against the Russian bank VEB and the country’s military bank. The banking sanctions would ban US financial institutions from processing transactions for the VEB and for Russia’s military bank, PSB. This will effectively cut banks off of USD-related transactions.

Biden also announced comprehensive sanctions on Russia’s sovereign debt and three individual members of Putin’s inner circle. Russian government banks can no longer raise money from the West and cannot trade new debt (usually through bonds) in the US or European markets.

President Biden continues to assert the risk of Russia attacking Ukraine. Mr. Biden said there is little reason to believe that Russia is still interested in diplomacy. He pointed to Moscow’s recent transfers of troops and supplies of medical equipment along the Ukrainian border.

Mr. Biden stressed that the United States will stand with Ukraine no matter what. At the same time, he is ready to impose more sanctions if Russia continues to move forward. Mr. Biden said NATO reinforcements will continue to operate only in a defensive capacity, but that does not mean the alliance will not respond kindly to Russian military exercises.

Fed’s decision on interest rates

Tensions between Russia and Ukraine could complicate Fed interest rate decisions. The prospect of a Federal Reserve rate hike after March could become less clear if Russia continues to infiltrate Ukraine.

Russia is a major exporter of oil and natural gas. The country is also the largest exporter of wheat and palladium. Moscow is also a major supplier of nickel, aluminum and other metals. Current tensions have pushed up the prices of oil and gasoline, a staple for many Americans. Prices for oil and other commodities are rising on fears of war and sanctions from the United States and its allies that could lead to limited supplies.

When oil prices increase, other costs will also increase and investors are worried that inflation will increase even higher. If the Fed raises interest rates, it will also affect the economy and the unemployment rate. So adding these politically-related stressors gives the Fed more of a balance to balance before making any decisions regarding interest rates.

Some other information:

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