The fallibility of humanity has been brought to the forefront of the financial markets as of late, with economists convinced that the Federal Reserve let inflation run too hot too long, geopolitical uncertainty reaching a peak as Putin invades a former ally on its western border. At the same time, Europe is struggling through an energy crisis that many fear could lead to another recession or, worse yet, years of stagflation (low/no growth, high inflation) if this situation isn’t alleviated soon.
Bitcoin and its decentralized blockchain-back nature make it a perfect alternative to fallible fiat currencies, as it significantly reduces the vulnerability to human error and allows for the smooth free-market environment that economists have been theorizing for centuries.
Bitcoin is rallying ahead of President Biden’s anticipated executive order focused on policing the burgeoning cryptocurrency market. Recent concerns surrounding Russia’s use of Bitcoin propelled this leading digital asset to the forefront of the Biden regime’s regulatory probe.
This is one of those rare times when government regulation is actually a bullish signal for a financial asset. Crypto regulations would further legitimize this opaque asset class and likely open the door for institutional investors to explore this space further and even potentially directly invest in these blockchain-backed coins for their client portfolios.
Russia-Ukraine Conflict Accelerates Adaptation
Bitcoin BTC has held buoyantly amid the market dragging Russian invasion of Ukraine as investors consider the long-term adaptation of a decentralized digital reserve currency. The potential upside in Bitcoin following the egregious -64% devaluation of the Russian Ruble (fiat currency) in the wake of justified Western sanctions.
Cryptocurrencies are the most enlightening winner of the Russia Ukraine conflict as their rally illuminates the shortcomings of the world’s 180 distinct fiat currencies. The notion that a global superpower’s currency like the Russian Ruble can lose over -50% of its value in one week just because other governments decided to put sanctions on the country is a scary thought (even if these sanctions are more than justified).
Is It The Beginning Of The End For Fiat Currencies
Fiat currencies are the 180 distinct global systems of money controlled/regulated by their respective central banks, which immediately leave this government-backed money vulnerable to human error (occurs much more frequently than many think).
The value of fiat currencies is derived from nothing other than our government trust and global market professionals’ acceptance of its worth because there haven’t been any real alternative options until now.
Cryptocurrencies are upending the world’s financial system and Biden’s imminent executive order to “regulate” them only further legitimizes these digital assets’ utilization by deep-pocket money managers and global institutions.
Bitcoin is up over 20% over since Russia officially invaded Ukraine as investors wrestle with the hard truth that fiat currencies are far less safe than we think and that cash under your mattress will do nothing but lose value over time (and at an accelerated rate these days).
Final Thoughts
Cryptocurrencies will be a part of our new economy whether you like it or not, and it would be prudent to invest today before their mass adaptation. I would recommend a small portfolio allocation to this highly volatile asset and would consider diversifying your crypto exposure with Ethereum and Solana (SOL).
Both coins offer advanced applications beyond just a store of value or medium of exchange such as smart contracts (automated contracts that execute financial transactions once/if specified stipulations are met. ETH has the first-mover advantage (which means a lot considering its broader/longer-standing acceptance), while SOL is a much more functional open-source blockchain coin (30x faster with transaction costs are 1,000x cheaper).
However, Ethereum 2.0 coming out this year is expected to close these advantage gaps that SOL has on it and create a much safer processing ecosystem for its users.
Happy Trading!
Dan Laboe
Equity Strategist & Manager Of the Headline Trader Portfolio @ Zacks Investment Research
