Ordinarily, you would think that a destabilization of the modern global order would be extremely problematic for not just cryptocurrencies but the capital markets overall. While market valuations are never predictable — otherwise, you wouldn’t be reading stories like this — arguably most investors require some semblance of reliability to participate. But with cryptos right now, the destabilization may be the upside argument.
As you know, Russia made the utterly perplexing decision to invade Ukraine, a move that global leaders condemned as reckless. Of course, such a brazen attack could not go unignored. As promised, the U.S. and western allies imposed increasingly severe sanctions on Russia, with the latest batch of penalties targeting the Russian ruble. At time of writing, the fiat currency is imploding, which may cynically help cryptos.
To be clear, while the free world rallies around Ukraine — and I’m doing my small part in opposition to this premeditated crisis — it’s important to realize that the Russian people do not want this war. Increasingly, even some politicians in the country are voicing their dissent. Still, it cannot be avoided that the unnecessary violence will greatly affect individual citizens, which draws intrigue to cryptos.
How so? As decentralized assets, they transact outside the global fiat currency system and are technically able to sidestep certain sanctions. But the overwhelming catalyst for cryptos right now could be that they act as convenient stores of value. While the ruble may be tanking, virtual currencies overall are up 5% as of this writing.
It’s entirely possible that this catastrophe could lift digital assets, which have been trading inside a frustrating consolidation pattern. Below, we’ll take a look at certain high-profile cryptos and what price points to watch out for.
- Bitcoin (BTC-USD)
- Ethereum (ETH-USD)
- Tether (USDT-USD)
- XRP (XRP-USD)
- Terra (LUNA-USD)
- Avalanche (AVAX-USD)
- Dogecoin (DOGE-USD)
On surface level, Russian consumers’ push toward cryptos is a powerful catalyst for blockchain assets. At the same time, the Kremlin is likely deeply embarrassed at how its initial assault transpired. Therefore, the situation can get far deadlier and more disastrous, making even cryptos a risky proposition.
Cryptos to Watch: Bitcoin (BTC)
According to Singapore-based payment gateway TripleA, more than 17 million Russians — or roughly 12% of the population — own cryptos. Per data from the Pew Research Center, about 16% of Americans say they have used virtual currencies to some degree. So, the adoption rate is somewhat similar between the two countries, which bodes well for Bitcoin.
As the ruble erodes in value — it’s 114 to the dollar as I write these words — bank runs have naturally intensified. Many are seeking cover, trying to convert rubles to hard currency at a hefty premium. But another option exists — run to Bitcoin and other cryptos.
If I were to approach this dynamic from an optimist’s perspective, I’d say that we could see a rather robust pivot to BTC. Again, with the ruble approaching hyperinflation, it really doesn’t make sense to hold onto these notes. Instead, you might as well secure your wealth in cryptos before you lose even more wealth.
BTC is currently trading well above its 50-day moving average, which sits at $40,360. However, $50,000 is really the level where most investors can have confidence in this rally.
One of the many burgeoning utility-driven cryptos, Ethereum made a powerful move, driving up nearly 4% over the trailing 24-hour period (since the early afternoon of March 1). Yet ETH, which is typically more volatile than Bitcoin, lags its performance, which is up nearly 6% during the same frame.
If anything, you’d expect a rally to push up ETH higher than BTC. Conversely, a downturn would negatively affect the former over the latter. So, why is Bitcoin leading the charge between the two?
This dynamic likely stems from the panic effect. With the Russians suffering from a contextually unprecedented bank run, those who are going to secure their wealth will likely target cryptos that are most familiar to them. Thus, while 12% integration is a lot, it also leaves many millions who are blockchain newbies. In that case, people will reach for the familiar, which is Bitcoin over everything else.
Currently, Ethereum is trading right on top of its 50 DMA ($2,907). In contrast, its 200 DMA ($3,565) is really where ETH needs to be to generate broader sustainable confidence.
Cryptos to Watch: Tether (USDT)
Normally, I don’t like to talk too much about stablecoins like Tether unless extraordinary circumstances call for it. Being pegged to the U.S. dollar, USDT will always feature the same price: $1. It’s not very interesting from a capital returns perspective. However, these are quite extraordinary circumstances.
As you can imagine, Russian citizens are scrambling to protect their wealth from the sanctions sparked by their leader’s irresponsible behavior. Sure enough, many folks — not just Russians — are seeking shelter in Tether. According to data from Stockcharts.com, the volume level of USDT on Feb. 28 was 55,323.
As I write this on March 1, volume spiked to 344,250,016. That’s a staggering increase of over 6,222X.
We’ve seen big volume spikes before in Tether. But this could be one of the biggest day-to-day increases — if not the biggest (as the day is still young) — we’ve witnessed, demonstrating how shocked everyone was regarding the Russian invasion.
One of the benefits of holding Tether or other stablecoin cryptos is that you can earn robust interest on them. It’s one way to beat inflation, though it’s an incredibly risky way to live since USDT could be unbacked.
In the paradigm before the outbreak of armed conflict in eastern Europe, XRP’s main struggle was with the Securities and Exchange Commission. With the watchdog agency filing a lawsuit against XRP founder Ripple Labs for allegedly using XRP to sidestep securities laws, the courtroom — not the battlefield — represented its supporters’ biggest concern.
Now, they must consider the escalating violence as part of their due diligence. But so far, the conflict has been an upside catalyst for the maligned virtual currency. With millions of people looking to safeguard their “paper” wealth, XRP may not be the safest choice for protection but it’s available. Further, it’s possible that in some regions, it might not attract a premium as would something like Bitcoin or Ethereum.
Another intriguing factor boosting XRP is that since February 2021, the coin has generally charted a series of higher lows. Should the SEC lawsuit turn out favorably for Ripple Labs, it could skyrocket the asset in question as XRP would then have legal clarity compared to other cryptos.
Some analysts are calling for the coin to reach above $1. Considering that its 200 DMA is only a few cents shy of a buck, this forecast might pan out.
Cryptos to Watch: Terra (LUNA)
Among the top cryptos available, Terra might be the one to watch closely. Fundamentally, Terra is a blockchain protocol that uses stablecoins to “power price-stable global payments systems.” Per Coinmarketcap.com, the developers of this protocol aim to combine the stability and wide adoption of major fiat currencies with the censorship-resistance of Bitcoin, all the while facilitating fast and affordable settlements.
Such an attribute could come in handy over the next several days for Russian consumers. When global sanctions started to bite, many banks offered foreign currency exchange but at a rich premium to protect themselves from incoming ruble devaluation. Such premiums could get awfully pricey for Russians exchanging large amounts, which makes a decentralized cost-effective protocol like Terra extremely attractive.
Over the trailing seven days, Terra has shot up almost 69%, a staggering performance that far exceeds the performance of any other crypto ranked within the top 20 by market capitalization. With LUNA above both its 200 DMA ($52.49) and 50 DMA ($62.88), it could swing higher still, though prospective buyers may want to step in slowly and keep the powder keg dry.
A layer one blockchain — or a base protocol that features the ability to integrate improvements to make the overall network more scalable — Avalanche is among the many cryptos that seek to usurp Ethereum as the king of utilitarian assets. Specifically, Avalanche aims for ETH’s throne regarding smart contract facilitation.
It’s entering the scene at an ideal time. Although Ethereum has tremendous brand presence, which might insulate it from competitive pressures, its network is becoming expensive and unwieldy. Saddled with costly network fees (called gas), developers are jumping ship to alternative blockchains. Of course, Avalanche is all too happy to soak up the demand.
However, AVAX could also play another role as a protector of wealth during times of turmoil. While the news cycle is focused on what’s happening in Russia right now, we should not be so arrogant and complacent to think that a similar situation couldn’t happen to us.
Unfortunately, Moscow has completely ruptured the modern global order, which means nothing is off the table anymore. And with AVAX appearing to break into $100 territory soon, this is one of the coins to keep close tabs on.
Cryptos to Watch: Dogecoin (DOGE)
In times of panic, will mass-scale desperation lead to people buying up meme coins like Dogecoin? It’s an interesting concept. On one hand, the community supporting such trades is exceptionally enthusiastic, which could lead to sharp (albeit random) spikes. On the other hand, meme-based cryptos are incredibly volatile, making them unsuitable for wealth protection.
Still, when factoring in elements like acquisition premiums, it raises a grand thought experiment: bet on something like DOGE or on the ruble?
The problem for both is that fundamentally, they lack the substance to rise higher at the moment. Obviously, the ruble is toxic as are virtually all Russian assets. And while Dogecoin is up, it’s only up modestly, having gained 4% for the day and only 3% for the week.
Given the poor performance on what should be a slam-dunk narrative for cryptos — that is, skyrocketing inflation for a currency of a major world power — Dogecoin is too risky at these levels. Play with it if you must but don’t endanger yourself with unnecessary exposure.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, XRP and DOGE. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.