Digital assets are in fact not good protection from both geopolitical risks and inflation expectations
The bitcoin price briefly dipped to one-month lows around $34,300 on Thursday along with traditional financial markets that plunged after Putin announced a military operation in the Donbas region of Ukraine. As risk aversion abated, the digital currency bounced to finish above the $38,000 figure. Today, the coin retains a modest bullish bias but lacks recovery momentum to get back above the $40,000 mark.
Global investor sentiment has improved somehow as investors looked past developments in Ukraine. However, uncertainty remains elevated, with risk trends unstable, suggesting both equity markets and cryptocurrencies could suffer another sell-off in the near term as the Ukraine crisis intensifies.
In general, the latest geopolitical developments and the way cryptocurrencies react to risk aversion suggest digital assets are in fact not good protection from both geopolitical risks and inflation expectations. In contrast, the safe-haven gold rallied to September 2020 highs around $1,975 on Thursday before steadying marginally above $1,900 today.
Amid a flight to gold, the US dollar, the Japanese yen, and the Swiss franc, the cryptocurrency market will stay vulnerable to deeper losses as long as the Ukraine crisis remains in everyone’s focus. As such, fresh attempts to overcome the $40,000 level will likely bring fresh selling pressure in the coming days.
On the downside, the immediate support now arrives at $37,500, followed by $36,000 and yesterday’s lows. The key barrier for sellers stays around the $30,000 figure that could be targeted for the first time since July if the ascending 100-week SMA, currently at $33,000, gives up anytime soon.
Other digital currencies have also switched into recovery mode, with Ethereum holding around $2,600 following yesterday’s plunge to one-month lows in the $2,200 area. On the upside, the $2,800 zone represents the immediate resistance, followed by the $3,000 psychological level.