Global Turmoil Highlights Need for Crypto Yet Again

By Alex Benfield

  • Bitcoin (BTC, Tech/Adoption Grade “A-”) is slowly creeping up to break through resistance levels.
  • Ethereum (ETH, Tech/Adoption Grade “A”) continues to hold the important $3,000 support level.

Last Wednesday, I explained how Russia’s new positive stance on cryptocurrency highlighted a change in the macro perspective on the space. 

In the past week, Canada has been the latest global power to take things to a new level — not through adoption, but through what many consider to be government overreach. 

In response to anti-vaccine mandate protests by cross-border truckers, Canadian Prime Minister Justin Trudeau invoked the Emergencies Act on Monday for the first time in the nation’s history, allowing Canada to freeze protestors’ bank accounts. 

This has sparked global outrage over fears of money seizures. Authorities are also going after anybody sending money to fund the group of protestors. They’ve started targeting crowdfunding sites like GoFundMe and GiveSendGo, halting any further donations by those companies, freezing the funds and blocking those funds from reaching the truckers.

In fact, the Canadian government has specifically called out attention to Bitcoin by ordering all FINTRAC-regulated organizations to stop interacting with more than 30 Bitcoin wallets that were being used to distribute funds to the truckers

This situation is ongoing, so it’s hard to say if this order has successfully prevented the truckers from receiving the Bitcoin … although it has certainly made it much harder for them to receive funds in general.

While this overreach was approved by executive action, a similar worry has been voiced in regard to all centralized currencies. In fact, it’s the core issue of any possible central bank digital currencies (CBDCs) — which can be mistaken for true cryptocurrencies by investors new to the space. 

The key strength of cryptocurrencies is decentralization, which prevents any bad actors from overstepping and seizing control of people’s finances ... just like Trudeau is currently doing.  

Crypto’s decentralized, censorship-resistant nature is the clear solution to these types of situations, in which a centralized government imposes its will on the finances of the people. I would argue that anybody whose accounts have been frozen on behalf of the Canadian government now sees the value of Bitcoin and other cryptocurrencies ... a lesson that cannot be unlearned.

While it is hard to see the direct effect of these macro developments in BTC’s price action, you could argue that it’s trading at a higher floor price now due to the positive exposure. 

BTC has crossed back above the key $42,000 support level. The next big challenge will be the $45,000 level. Bitcoin will need to hold the $42,000 level as support if it wishes to build any momentum.

Here’s BTC in U.S. dollar terms via Coinbase Global (COIN):

 

Speaking of price action, Ethereum seems to be coiling up and waiting for its turn to break out. There appears to be an inverse head and shoulders pattern forming on the ETH/USD chart, which could send ETH prices higher.

ETH hasn’t reacted too strongly to the recent macroeconomic events of the past two weeks, and it is likely to follow in whatever direction BTC goes next. 

However, ETH has been testing both support and resistance levels in its quest to break through a key range. The longer ETH manages to hold support and continue to test the resistance levels in the highlighted area below, the more likely it is to break out. 

And we expect a breakout above $3,400 ... with the possibility that it could extend much higher.

Here’s ETH in U.S. dollar terms via Coinbase:

 

Notable News, Notes and Tweets:

What’s Next

Talk about an eventful few weeks in the markets!

The narrative in crypto has quickly shifted from market fear over the Federal Reserve’s inflation reduction measures to Bitcoin as a solution to governmental overreach. 

Prices haven’t really caught up with the shifting narrative yet, making a bounce for both BTC and ETH seem very likely. Whether or not that bounce will be quick and short lived or more sustainable is yet to be determined.

It’s taken many years for cryptocurrencies to garner as much attention as they have up to this point, but recently it seems like adoption is accelerating and the macro case for Bitcoin has become clearer than ever.

It’ll will be very interesting to see how things shape up as governments will be forced to either open up to crypto or dig in their heels and continue to make things tough for the crypto community.

In the meantime, patience is key; paradigm shifts like these take time to play out.

Best,

Alex

About the Crypto Analyst

Alex has been actively researching and investing in cryptocurrencies since 2017. He contributes research and reports to several Weiss crypto publications, with a primary focus on helping to create crypto trading strategies.

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