Cryptocurrencies: War and inflation could be positive, or trigger stronger regulation

This article has been written exclusively for PRINCEMAN

Cryptocurrencies are global assets
Governments Might Love or Hate Cryptocurrencies
Refugees could adopt cryptocurrencies
Hacking presents dangers
U.S. executive order, expect a lot of volatility
The last time a major war broke out in Europe, cryptocurrencies did not exist. Today, these alternative means of exchange offer individuals, businesses and even governments the opportunity to transport their savings, assets and reserves. Although cryptocurrencies are highly volatile assets, they offer several advantages. Cryptocurrencies escape governments' radar, are semi-anonymous, transcend borders, and exist in cyberspace. An IT wallet may contain a small or massive amount of Bitcoin, Ethereum or a multitude of other cryptocurrencies.

After Russia's invasion of Ukraine on February 24, the reflex reaction of the cryptocurrency market was to go down. The Futures Bitcoin of march fell to $34,300, and Futures Ethereum march at $2,305.50 per token.

The two major cryptocurrencies have combined market capitalizations of more than 60% of the total value of the asset class. Although Bitcoin and Ethereum fell when the war broke out, they reached lower levels than January 24 and recovered as hostilities continued.

The United States and Europe have imposed sanctions on Russia against banks and companies as punishment for the attack, and the Russian stock market and the ruble fell after the sanctions. Meanwhile, cryptocurrencies could end up helping some Russians and those fleeing war-torn Ukraine. If the war spreads, Bitcoin, Ethereum and the more than 18,000 other cryptocurrencies could become popular assets, inflaming the bull market that has hit a wall of sales bricks after the most recent highs in mid-November 2021.

Cryptocurrencies are global assets
Ideologically, cryptocurrencies reject government and central bank interference in the currency. Governments issue legal tender, which gives them control of the money supply.

As we saw during the 2008 global financial crisis and the 2020 global pandemic, countries around the world injected liquidity into the financial system through low interest rates and stimulus measures, which amounts to spinning the banknote presses over time. Monetary and fiscal policies can increase or decrease the money supply based on political or financial programs.

Governments have no say in the supply of cryptocurrencies, as these transcend all borders and are global assets. The only comparison in the global financial system is gold, because the only way to increase the supply of gold is to extract more from the earth's crust.

Refugees could adopt cryptocurrencies
The Russian government and its network of oligarchs may not find liquid cryptocurrencies or assets completely anonymous to evade sanctions. However, refugees fleeing for their lives can easily carry Bitcoin, Ethereum and the major cryptocurrencies that offer liquidity when ATMs and banks become unavailable.

While it may be too late for Ukrainians to convert their savings into cryptocurrencies, other former Soviet satellites in the Baltics and Eastern Europe could see renewed interest in cryptos as leak capital. The observation of the Russian invasion is likely to prompt many inhabitants of the region to prepare for a similar fate. Refugees who have no choice but to flee for safety could carry cryptocurrencies on a USB stick or secure password in their pocket or sewn into their clothes

Hacking presents dangers
Security remains a clear and present danger for those who hold cryptocurrencies. Hackers are becoming more sophisticated, and individual hackers and government-sponsored cyber warriors can wreak havoc on accounts. In January, the BBC reported that North Korean hackers stole nearly $400 million worth of digital currencies in 2021. In October 2021, Fortune reported that Russia accounted for most of the state-sponsored hacks detected by Microsoft, with a 58% share. Hacking is quickly becoming a dangerous and effective cyberwar tool.

U.S. Executive Order, expect a lot of volatility
Russia's first Soviet leader, Vladimir Lenin, said: "There are decades when nothing happens, and there are weeks when decades happen." Just a few weeks ago, few believed that the world would face Russian aggression that has caused the largest flow of emigration to Europe since World War II. Moreover, almost overnight, the world faces the increased risk of nuclear conflict.

Markets reflect the economic and geopolitical landscapes. {Inflation is at its highest level in more than four decades. A war is raging in Ukraine, and the US and its allies have imposed sanctions on the Russians, which will only add fuel to the inflation fire. Markets across all asset classes have become volatile, with uncertainty driving price fluctuations.

On March 9, President Joseph Biden signed an executive order to ensure "responsible innovation in digital assets." The decree recognizes the growth of the cryptocurrency asset class and calls for:

Protect U.S. consumers, investors and businesses from systemic and other risks.
Protect U.S. and global financial stability.
Mitigate illicit financing and national security risks.
Protect U.S. leadership in technology, economic competitiveness, and the global financial system.
Promote safe and equitable access to affordable financial services.
Support technological advances and the responsible development of digital assets.
Study the possibility of a digital currency from the US central bank.
Meanwhile, the burgeoning cryptocurrency asset class has experienced massive price fluctuations. While trends in Bitcoin, Ethereum and the more than 18,000 other cryptocurrencies have remained bearish since the November 10 peak, war and inflation can only prompt governments to tighten the regulatory noose, reinforcing the ideological case for this asset class.

Expect a lot of volatility in cryptocurrencies. On March 9, they could be much closer to lows than highs, as they could be safer than fiat currencies or other assets that have reached untouchable levels in recent weeks. Security and custody issues could be worth it, as the geopolitical landscape causes many market players to lose confidence in their governments.

In theory, Western sanctions against Russia and the war in Europe are bullish developments for the cryptocurrency asset class. At the same time, the US executive order aims to control and manage the asset class, while the underlying ideology supports individuals rather than governments. Time will tell if the theory translates into another explosive rally.