Military Conflict Tanks Bitcoin
Readers should hold off on any new Bitcoin purchases.
Many investors were left wrongfooted as Russian leader Vladimir Putin pushed into Ukrainian territory from three directions sending missiles deep into the heart of Ukraine.
The Russian Ruble exploded with weakness to 87 to $1 USD signifying widespread panic stoking the forex markets.
In a climate with military tensions boiling at a generational high, it is a terrible time to buy the Bitcoin dip as Bitcoin has proved to be dumped by investors who are seeking a safer safe haven.
To answer how long Bitcoin will see this weakness means we need to answer the question of how long is Russia’s “peacekeeping mission”?
The markets didn’t have a full-scale takeover priced into the markets and if this kinetic war is dragged out, this could truly mean we are in for a sub-$30,000 for Bitcoin.
The only certainty right now is that the Ukrainian and Russian standard of living is about to fall off a cliff.
Fiat currency is still too dominant for these desperate citizens to pile into Bitcoin and every one of these people is looking to get their hands on the US dollar.
This proves that in times of desperation, military conflict, and geopolitical turmoil, investors are still not comfortable with migrating into Bitcoin.
This should be a wake-up call for Bitcoin engineers to improve the asset class in terms of safety, transactional process, and ease of use.
Another important variable into how Bitcoin prices will how will it react if Russia turns this into a genocide.
Do they wipe out every city-destroying infrastructure causing inflation to rip higher?
Bitcoin has already proven that hyperinflation in the short-term adversely affects Bitcoin prices as investors flee the digital gold and in turn purchase rental homes and buy commodities that are seen as a better short-term inflation hedge.
Hyperinflation is a vicious cycle that encourages hoarding which triggers more hoarding as the scarcity mindset sets in.
It will be fascinating to see how this conflict in Eastern Europe influences domestic dynamics in the American economy.
White House Press Secretary Jen Psaki reiterated that the US government is comfortable absorbing the cost by saying to the media, “defending freedom will have costs for us as well and here at home.”
The government plans to pass the cost to the American taxpayer in an already tight economic backdrop.
With the US government pushed into a corner, tensions are running high, and that climate is a poor one for crypto.
Investors are rating Bitcoin more as something they need to avoid for now and are being more pragmatic in searching for inflation hedges.
We are barreling towards yet another supply shock because of a more wide-ranging Russian agenda.
A possible supply shock sets up poorly for Bitcoin price action and with Putin holding all the cards, I would avoid Bitcoin until we get some sort of resolution on this which as it currently appears, might be a while.
Putin has behaved aggressively at every inflection point betting that he will meet minimal resistance and so far, he has been absolutely correct.
Time will tell if this emboldens him to overshoot more than initially planned or not.
Any relief rally in Bitcoin should be sold for the foreseeable future.
