Russia Declares War on Cryptocurrency

The Ukrainian border isn’t the only place where Russia is marshaling its forces for battle. The central bank of Russia is calling for a ban on cryptocurrency trading and mining, citing “potential financial stability risks” as their motive. They’re proposing three amendments to the country’s current regulations on crypto. The proposal is to do the following:

  • Ban crypto as a means of payment
  • Ban the organization and issuance of crypto
  • Ban banks from investing or transacting in crypto

Sound familiar? It mirrors a similar ban issued by China earlier this year, minus the crypto mining component. That’s coming next. The central bank report described crypto mining as a “danger to the green agenda of Russia.” Apparently, they didn’t get the memo. Over 75% of crypto mining in the world is done with renewable energy.

Bans are nothing new to the Russian people. Under Soviet rule, anything made in the West was either forbidden or made impossible to buy. That didn’t stop Levi Strauss (LEVI). Young people were paying two hundred rubles apiece for 501’s at the height of the cold war. Putin isn’t hurting Bitcoin with his crypto ban. He’s creating demand. Resistance is futile.

Fed Rate Hike Announcement Drops Bitcoin to $36K

Another piece of good news for crypto investors is the most recent Fed announcement about interest rates. They’re going up and Bitcoin (BTC) dropped down close to $36K, extending the dip. The first interest rate hike will happen in March. We’re in a buyer’s market until then. Prices will be low for a while, but don’t expect them to stay that way.

Bitcoin is down 24% YTD. That’s a scary number for retail investors who got their feet wet during the pandemic and the reopening that drove market prices up to historic levels. What we’re experiencing now is a correction. BTC’s not going away, nor are the tech companies that are taking hits right now. Are you panic selling Google (GOOG) or Apple (AAPL)?

Some analysts recommend bonds over Bitcoin when interest rates rise. Sorry, I still can’t do it. The iShares Core US Aggregate Bond ETF (AGG) has a five-year return of 3.47%. Bitcoin made me 19.47% in the past twelve months. Ethereum Classic (ETC) posted a 254% gain during that same period. Play it safe if you want to. I’m in the market to make money.

Seeking Alpha Projects a Bitcoin Bottom of $10K

Clem Chambers, a writer I have tremendous respect for, wrote a piece for Seeking Alpha this week that projects Bitcoin will hit a bottom of $10K before it starts to climb again. He suggests starting dollar cost averaging somewhere around $20K. He illustrates the concept with some cool trader charts, including one with a “dead cat bounce.” Colorful. But he’s wrong.

Waiting for $20K is fruitless. Bitcoin won’t get there. At most, we’ll see a drop to $25K during the month of February and a surge in March when interest rates level off again. I don’t need charts for that. The last time BTC was below $20K was December 2020. It’s low in 2021 was $31K. Claiming it will go to $10K is a stock promoter trick to trigger a mass sell-off.

Tell me in six months if I was wrong. Before that, check the charts on Ethereum Classic (ETC). If you use Clem’s reasoning, they hit their “dead cat bounce” this week. Bitcoin is still sloping their way towards that point. I’m watching both carefully. As for the Russians, I’m not watching them at all. Putin is a child stamping his feet for attention. My grandchildren can give me that.

 

 

 

 

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About the Author

Russia Declares War on Cryptocurrency

Kevin Flynn

A former financial professional and founder of AdvisorScale Financial Writing, Kevin lives in Leominster, Massachusetts with his wife Evelyn, two cats, and nine wonderful grandchildren.