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Good morning. Here’s what’s happening:
Markets: Bitcoin started the day promisingly before dropping, but altcoins Terra, Avalanche and Shiba Inu rose.
Insights: Canadian crypto sanctions show how crypto and CBDCs diverge.
Technician’s take: Bitcoin tested the $40,000 resistance level on Wednesday before declining.
Bitcoin spurted ahead through much of Wednesday morning, mirroring the performance of equity markets that, for the first time in days, seemed oblivious to the mushrooming tensions on the Russia-Ukraine border.
But by midday, the largest cryptocurrency by market capitalization had declined into red territory after Ukraine declared a state of emergency and urged its citizens living in Russia to depart. U.S. intelligence said that a Russian invasion was imminent.
At the time of publication, bitcoin was trading below $37,500, down about 2% over the past 24 hours. Ether, the second-largest crypto by market cap, was changing hands below $2,600, down about 1% during the same period. A number of altcoins had a good day with Terra’s luna up about 10%, and avalanche and shiba inu registering healthy gains. Cardano and Solana also rose for the day.
“The altcoins in the past 24 hours are having a very early spring,” said Marc Lopresti, the managing director of asset manager, The Strategic Funds, on CoinDesk TV. “We’re going to see continued strength in the altcoins, particularly those that are part of the metaverse,” he added.
S&P 500: 4,225 -1.8%
IA: 33,131 -1.3%
Nasdaq: 13,037 -2.5%
Gold: $1,908 +0.5%
Canadian Crypto Sanctions Show How Crypto and CBDCs Diverge
Central bank digital currencies (CBDC) are often equated to bitcoin. Some go as far as to say the eCNY, China’s CBDC, is a “government version of bitcoin.”
But the Ottawa trucker convoy has proven this to be anything but.
The protestors’ funds are safu. Some of the bitcoin landed on exchanges but at least $500,000 went to another wallet – maybe on a non-Canadian exchange, or maybe a self-custodied one – and was then sent further afield.
Money tied up in fiat currency, however, suffered a different fate because it was frozen in a dragnet to suffocate the protest. The thaw of accounts has already begun and the protest is over.
Civil liberties associations in Canada are concerned at the speed of the freeze and the lack of transparency around the process. Usually lists of designated nationals are public documents; the U.S. Office of Foreign Asset Control publishes a database that you can peruse to find Russian officials and oligarchs, Iranian hackers and Hong Kong’s leader Carrie Lam.
Civil liberties groups are challenging the constitutionality of the court order over fears that it could happen again. For now, bitcoin fixes this. But CBDCs? They are problematic. Where the comparison between bitcoin and CBDCs like the eCNY falls short is that bitcoin is decentralized and with no central issuing authority. CBDCs are a digital version of cash issued by a central bank.
Bitcoin and other cryptocurrencies use a decentralized ledger but CBDCs are a digital version of cash issued on a digital ledger. CBDC’s digital ledger is similar to a permissioned blockchain, which is likely where the erroneous comparison originates.
One of the key tenets of China’s CBDC is control of the yuan. Control of the supply of the money – WeChat Pay and Alibaba’s digitization of fiat for use on their payment rails annoys the Central Bank – ensures that money can be cancelled.
Should you become too politically noisy, your wallet can be disabled.
During last year’s CoinDesk Consensus conference, Yaya Fanusie, a Fellow at the Center for a New American Security, and former CIA counterterrorism financing analyst, highlighted that China’s CBDC efforts were all about control using the example of H&Ms disappearance in-country over its support for a measure to remove Xinjiang Cotton from its supply chain.
“This is really about data. The key thing here is that the central bank is, I think, inserting itself more into the payment architecture,” he said during Consensus 2021. “You’re creating architecture that gives the government a little bit more insight into transactions.”
The truckers’ evasion of government sanctions by using crypto shows that bitcoin has nothing to do with CBDCs. You can’t ”cancel” a bitcoin transaction like you can with a CBDC, and the only thing you can freeze are the fiat ramps in Canada.
Granted, an American CBDC or one made by a European country would have more privacy safeguards built into it than one from the People’s Bank of China. But Canadian banks are also subject to privacy law and usually require court orders to freeze accounts.
Regardless of your opinion of the truckers, let’s hope Ottawa’s is the exception, not the norm, and that we do not have to prove if a CBDC would be easier to control than bitcoin.
The relative strength index (RSI) on the four-hour chart is neutral, which means the price could remain within the $36,000-$40,000 range into the Asia trading day. On the hourly chart, however, the RSI is declining from overbought levels. That means sellers could remain active over the short term.
Momentum signals are still negative, which is one reason why price bounces have been brief over the past few months. For now, upside appears to be limited beyond $46,000.
8:30 a.m. HKT/SGT (12:30 a.m. UTC): Australia private capital expenditure (Q4)
5 p.m. HKT/SGT (9 a.m. UTC): France consumer confidence (Feb.)
9:30 p.m. HKT/SGT (1:30 p.m. UTC): Chicago Fed national activity index (Jan.)
11 p.m. HKT/SGT (3 p.m. UTC): U.S. new home sales (Jan./MoM)
“First Mover” examined the current state of the crypto industry in the Ukraine amid the Russia-Ukraine conflict. The hosts spoke with Michael Chobanian, founder of Ukraine crypto exchange Kuna. Also, “First Mover” covered crypto markets analysis from Marc Lopresti of The Strategic Funds. Will today’s rebound last? As part of CoinDesk’s Tax Week, David Kemmerer of CoinLedger focuses on Form 1099-B.
Russia Could Use Cryptocurrency to Blunt the Force of U.S. Sanctions: Russian companies have many cryptocurrency tools at their disposal to evade sanctions, including a so-called digital ruble and ransomware. (The New York Times)
“Bitcoin is also still undergoing a slow reversion to the mean after peaking at $68,000 in early November. Essentially, financial gravity is drawing down a dramatic speculative bull run – bitcoin reached $36,000 for the first time ever just over one year ago. Meanwhile, though rising inflation is also a theoretical case for bitcoin, that thesis has yet to prove itself in practice.” (CoinDesk columnist David Z. Morris) … “My own view: NFTs are vital building blocks for a new creator-centric digital economy in which our data is no longer mined by internet platforms and in which artists, musicians, photographers, journalists and publishers are able to connect directly with their audiences. But they are only that, building blocks.” (CoinDesk Chief Content Officer Michael Casey) … “Analysts say that the outcry is an indication that Chinese consumers have turned more sensitive to inflation amid the tough economic situation, and that Beijing, which has long been accused of exporting inflation via its massive supply of consumer goods globally, could also face imported inflation.” (South China Morning Post)
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