Ethereum (CCC:ETH-USD) is tough to figure, but it ain’t easy being a cryptocurrency analyst these days.

Following a mostly ridiculous year where you could throw any random digital asset into the mix and it would probably scream higher, the mood has drastically changed now, with and other major cryptos on the precipice.

Still, it seems to me that when the virtual currency sector is at its worst, that’s when the bulls decide to come roaring in.

Basically, that’s the recent story with Ethereum. Following a brief dip below the $2,200 level on Jan. 24, the second-biggest coin by market capitalization bounced substantially higher. As I write this, ETH is trading just under $2,500.

Moreover, it wouldn’t be the first time that Ethereum, all but poised for disaster, came back from the abyss even stronger than before, eventually screaming to record heights.

In the second half of July 2021, ETH temporarily slipped below the $1,800 mark before rocketing higher. At its peak, the coin was moving toward $5,000 before succumbing to the current malaise.

But could lightning strike twice? You bet — this is the crypto sector we’re talking about. Still, there are some reasons to approach the market with caution, primarily the brewing crypto cold war.

Russia and Ethereum

Not too long ago, the Bank of Russia, the nation’s central bank, stated that its government must ban all virtual currencies.

In a report under the bank’s Financial Stability Department, it theorized: [C]ryptocurrencies are volatile and widely used in illegal activities such as fraud. By offering an outlet for people to take their money out of the national economy, they risk undermining it and making the regulator’s job of maintaining optimal monetary policies harder.

Though the agency is not calling for banning Russian citizens from owning cryptos, it seeks new laws and regulations to ban crypto-related activities such as mining.

For Ethereum and other digital assets, the sharp tone went about as well as you would expect.

Recently, Russian President Vladimir Putin weighed in.

“[Thr] central bank has its own position,” Putin said. “It is connected with the fact that the expansion of this type of activity carries certain risks, and first of all for the citizens of the country, given the high volatility and some other components of this topic.”

However, Putin also stated that Russia has “certain competitive advantages” when it comes to mining, due to resource supply and “well-trained personnel.”

From my vantage point, whether private citizens benefit from ETH or not is a side issue. For Putin, he sees an opening, one to hurt the U.S. and simultaneously profit Russia, a double whammy.

Biden to Possibly Counter

According to a Politico report, former President Barack Obama said about current President Joe Biden, “Don’t underestimate Joe’s ability to [mess] things up.”

Well, the Biden administration has the ability to prove him wrong (or right).

Several days ago, Bloomberg released a report stating that the White House is preparing an executive order for cryptos that could be released in February.

“As part of the plan, Joe Biden’s administration will task multiple federal agencies with evaluating risks and opportunities that digital assets pose, Bloomberg said, citing unnamed sources. Their reports are due in the second half of this year.”

Without a comprehensive legal framework for assets like Ethereum, it’s difficult to know what’s acceptable and what’s not. However, now that the Russians are signaling some willingness to regulate crypto-related activities, it’s time for the Americans to match policies.

According to our own history, the Federal Reserve was stymied in addressing the fallout of the Great Depression, in part because the central bank’s “decision-making structure was decentralized and often ineffective.

Each district had a governor who set policies for his district, although some decisions required approval of the Federal Reserve Board in Washington, DC. The Board lacked the authority and tools to act on its own and struggled to coordinate policies across districts.”

Stated differently, decentralization may be good for the consumer. However, it’s not good for governmental control and order, as the Bank of Russia correctly argued.

Obviously, Putin wants greater control and influence in all economically significant matters. It’s imperative, then, that the U.S. matches the move, neutralizing Russia’s potential geopolitical advantage.

The Worrying Play

If I were a politician, my concern about Russia’s potential regulations is that they will discourage private investment in cryptos but simultaneously encourage its mining operations.

That way, we Americans would pay cold hard cash for the digital creations that the Russians mint, whether Ethereum or any other coin or token.

In such a scenario, he who has the cash wins. While Ethereum may be valuable, it’s not backed by anything. It could, in theory, go to zero.

That’s also the case for the U.S. dollar, but the dollar is backed by something: the credibility and reputation of the U.S.

To put it very simply, if we promote a laissez-faire approach to cryptos, we could end up holding the bag while the Russians end up holding bags of cash. Of course, we could always try to play Putin but I think he’s too much of an evil genius to be taken so lightly.

Personally, I would counter and stalemate that particular move the Russians are possibly making. Unfortunately, that would also imply a lower price for Ethereum and the crypto complex at large.

On the date of publication, Josh Enomoto held a LONG position in ETH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.