Nansen’s Daniel Khoo: Contractionary Monetary Policies & the Ukraine Crisis Lead To Bearish Bitcoin & Asian Investors Shifting To Stablecoins

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In the midst of the ongoing political tensions in Ukraine, a number of prominent experts have urged central banks and monetary authorities to adopt new monetary policies to fight the ongoing global economic slowdown.

The crisis has had a negative effect on the global asset prices and the stock market — specifically in risky assets such as cryptocurrencies, which are seen as high-risk investments with high volatility.

Bitcoin and other digital assets saw extreme volatility in the first half of this year, when they surged in value. But since the start of Q2, the digital currency has continued to fall, reaching levels that are below where it was at this time last year. Why is this happening?

Bitcoin’s Recent Volatility

The price of Bitcoin (BTC), which traded earlier Monday at its lowest point since mid-March, quickly recovered after that.


Bitcoin (BTC): $40,485 +2.4%

Ether (ETH): $3,016 +3%

Top Gainers

EthereumETH+2.1%Smart Contract Platform

Top Losers

CosmosATOM−2.5%Smart Contract Platform
Ethereum ClassicETC−2.4%Smart Contract Platform

Bitcoin recovers after dipping to six-week low.

The largest cryptocurrency by market capitalization was trading at $40,485 at press time, up 2.4% over the last 24 hours. Earlier, the bitcoin price fell to its lowest level in almost six weeks.

“Inflation, the Ukraine crisis, as well as contractionary monetary policies have all contributed to recent volatility,” said Daniel Khoo, research analyst at Nansen. As a result, the crypto market has also been affected.”

As people go risk-off on volatile assets, the fall in prices could be due to short-term negative sentiment. The market has become too hot and periods of extreme euphoria were historically followed by market corrections, so many investors are also gravitating towards stablecoins due to the uncertainty and short-term bearish outlook, Khoo said.

In the past 24 hours, Ethereum (ETH) has gained 0.87%, trading at $2,972. The S&P 500 index fell 0.7% while the Nasdaq rose 0.2% as China’s Covid restrictions tightened.

Crypto Adoption in Asia

Although Bitcoin is banned in China, its correlation with the stock market has created a circular economy.

CSE 300, a benchmark index of China’s 300 largest stocks, dropped 3% as lockdowns continued in Shanghai. The Hang Seng Index, Hong Kong’s stock index, dropped 2%.

Hang Seng is down 15%, CSE 300 is down 22%, and SP 500 is down 11% year to date.

With this continued decline in China stocks the market has now reversed gains made in March as it fought off U.S. threats to de-list China and continued COVID-19 concerns.

Part of the reason for last week’s decline in the S&P was China’s uncertain macroeconomic environment.

Similarly, Bitcoin fell 1% on Monday during Asia’s trading day. It fell further during U.S. trading on Monday. The price rose to $40,485. On Monday in Asia, Axie Infinity’s value dropped 10%, while NEAR, a token associated with layer 1 blockchains, dropped 10% and 9.3%, respectively.

Traditional Markets

S&P 500: +0.6%

DJIA: +0.7%

Nasdaq: +1.3%

Gold: $1,899, -1.8%

Hang Seng, other indices (TradingView)

Bitcoin is caught in the middle as the stock indexes of the world’s largest economy nervously watch those of the world’s second-largest economy to see how the next and hopefully final chapter of the Coronavirus plays out.

It’s a reversal from March when U.S. stocks dropped while Chinese markets rose. Because bitcoin follows U.S. movement, it did not follow the trend – but now that the “circular economy” of China has brought down the U.S. market, bitcoin is also down today.

Bitcoin (BTC) is stabilizing after a 3% decline over the past week. Short-term buyers have returned around the $37,500 support level, although resistance at $43,000 could stall an upswing in price.

Momentum signals remain neutral on the charts, which typically precedes a period of rangebound price action, similar to what occurred between May and July of last year.

BTC is roughly two weeks away from registering a countertrend bullish signal, per the DeMARK indicators. If confirmed, buyers could begin to accumulate ahead of a seasonally strong period in May.

Still, bearish signals on the monthly chart suggests limited upside for BTC beyond the $50,966 resistance level.

Via this site.


Chris Munch

Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.