Blockchain Technology As A Weapon

The cryptocurrency market keeps demonstrating mixed dynamics, with BTC/USD trapped in a narrow range of $38,000-$40,000. Investors seriously expected that events in Eastern Europe would not only trigger significant market volatility but also allow the cryptocurrency market to re-target its previous highs last seen at the end of last year. However, cryptocurrency prices remained at their pre-crisis levels.

The lack of a pronounced trend can be explained by two opposite positions of market participants. Some market players expect an influx of investment in the cryptocurrency sector against the backdrop of financial sanctions imposed on Russia. Others fear that to prevent the circumvention of sanctions, the US and EU authorities may tighten the regulation of the entire crypto industry.

The digital currency sector has seen growing interest from Russian investors in the past few weeks: in March alone, the number of users on cryptocurrency exchanges has more than doubled. Russians seek to preserve their capital amid rising inflation, global uncertainty, as well as strict hard currency controls when citizens don't have the physical ability to purchase foreign currency. Meanwhile, the EU and US officials are considering new measures to ensure that Russia cannot use crypto assets to dodge sanctions, including tighter regulation and classifying digital assets as securities. This week, the European Parliament was supposed to pass a bill that sought to ban cryptocurrencies that rely on proof-of-work (PoW) algorithm. However, the bill didn't get enough votes to be passed. The European Parliament's economic and monetary affairs committee voted 30-23 on Monday to keep the provision out of a draft of the proposed Markets in Crypto-Assets Regulation (MiCA), the EU's comprehensive regulatory framework for the crypto-assets market. It is worth noting that a different outcome of the vote could lay the foundation for further restrictions on the use of cryptocurrencies powered by an energy-intensive computing process (PoW) across the EU's 27 member states.

Meanwhile, US authorities keep urging crypto exchanges to provide personal information of customers who make transfers to private e-wallets to ensure that Russian individuals and organizations aren't using digital currencies to bypass sanctions. In the context of the current geopolitical crisis, blockchain technology has obviously become a weapon. Each party seeks to use it to its advantage and its own best interests. So far, most of the largest cryptocurrency exchanges have rejected a "blanket ban" on all transactions involving Russian addresses but said they would comply with curbs on individuals added to the sanctions lists. Given that the cryptocurrency market is likely to keep facing selling pressure, we recommend shorting BTC with a target of $30,000.