Author: 636Marx

Has the three-year agreement expired, will the Russia-Ukraine conflict really come to an end?

The "lighthouse country" expected interest rate hikes, wars, and capital repatriation have not materialized, and even a small spring in the stock market has appeared in the East. As the ancient saying goes, "As long as Qingfu does not die, the war will not end."

On October 23, the global digital currency market evaporated $90 billion in just two days, BRICS nations are seeking financial independence, and the Japanese market announced a cautious stance on crypto ETFs, while the East has made some preparations in the face of geopolitical threats. A great era of contention is about to begin.

Will this new financial system, which BRICS countries are promoting to reduce Western—especially U.S.—influence, push some established Western interests to take risks? If a great era of contention begins, where will Bitcoin and other digital currencies go?

The author delves into these four key trends, exploring their potential impact on the future of the digital currency market.

1. Triggers for the $90 Billion Evaporation in Digital Currency

The crypto market has recently suffered a heavy blow, evaporating $90 billion in 48 hours. Bitcoin, as the flagship digital asset, fell to $66,200, dragging the entire market down. Although the rapid sell-off has raised concerns, such volatility is not uncommon in the history of the crypto world. However, this time it is driven by a complex interaction of market sentiment, macroeconomic trends, and uncertainties in the global landscape.

What factors led to this sudden decline?

· Macroeconomic Conditions:

Global inflation and rising interest rates are putting pressure on speculative assets like digital currencies. As central banks tighten monetary policy to control inflation, funds tend to flow out of high-risk investments (including digital currencies).

· Global Landscape:

Although the crypto space is gradually gaining acceptance from traditional finance, especially with the U.S. taking a clearer stance on digital currencies, the U.S. Securities and Exchange Commission (SEC) approving Bitcoin spot ETFs, and presidential candidates promising new policies for digital currencies, they remain highly risky assets.

· Profit-Taking:

After months of sustained growth, some investors may decide to lock in profits, especially as Bitcoin approaches historical highs. The resulting sell-off triggered a snowball effect, prompting market participants to react to downward pressure, further accelerating the decline.

Experienced crypto investors understand that while market downturns can be painful in the short term, they often signal a recovery historically. The key question now is whether this pullback is a temporary correction or a sign of a more significant decline.

2. Japan's Cautious Stance on Crypto ETF Approvals Amid Global Changes

Japanese regulators have taken a more cautious approach to approving crypto-related ETFs. While many countries, particularly in North America and Europe, have embraced ETFs as a more convenient way for retail investors to access the crypto market, progress in Japan has been slower than expected.

Japan has long been viewed as a leader in crypto regulation, establishing a clear legal framework for digital currencies following the Mt. Gox scandal in 2014. However, early on, Democratic Party Minister Yuichiro Tamaki publicly expressed the desire to expedite the approval of crypto ETFs and to implement tax reductions and increased leverage for digital currencies. Now, the Financial Services Agency (FSA) in Japan seems to be taking a cautious stance on approving crypto ETFs.

However, this slowdown may also have some other internal reasons, such as:

Investor Protection:

While ETFs make it easier for retail investors to participate in the crypto market, considering the tendency for sudden market volatility, Japanese regulators may want to ensure that any ETF products are designed with strong consumer protection measures.

Regulatory Caution:

The FSA may be observing the performance of crypto ETFs in other markets before approving them domestically, among other considerations.

Globally, crypto ETFs have been well-received, particularly in Canada and the U.S., where major institutions have launched several Bitcoin and Ethereum ETFs. These products provide an entry point for investors who are reluctant to buy digital currencies directly, while also promoting broader acceptance of digital assets.

While it is uncertain why Japan has suddenly slowed its pace, it at least reveals an important message: the digital currency market may face significant volatility, and Japan wants to continue observing.

3. BRICS Nations Push to Reduce Western Financial Influence

The BRICS nations—Brazil, Russia, India, the East, and South Africa—are advancing plans to create a financial system that is less dependent on Western, particularly U.S., influence. As an ally of several BRICS countries, Iran has recently joined the call for this independent financial framework. Their goal is clear: to reduce reliance on the dollar and the global financial system, which is primarily dominated by Western institutions like the International Monetary Fund (IMF) and the World Bank.

Digital currencies play a key role in this new vision. Digital currencies may enable BRICS nations to trade directly with each other, bypassing the traditional banking system that is usually tied to the dollar.

For example, Russia and the East have already discussed using digital currencies to settle cross-border payments. Iran, facing widespread U.S. sanctions, is also keen to explore digital currencies as a means to circumvent financial restrictions.

However, significant challenges remain. Coordinating a unified financial system among countries with vastly different economic models is no easy task. Additionally, while digital currencies provide an alternative to traditional banking systems, their volatility poses risks for countries that need stable trade relations.

Nevertheless, the BRICS initiative highlights a growing trend: many countries are eager to reduce their dependence on the dollar and the Western financial system. If successful, this movement could create new opportunities for digital currencies, especially those designed for cross-border transactions and remittances.

4. The Fate of Bitcoin Amid Potential Great Power Conflicts

In recent years, tensions between the East and the U.S. have escalated, involving issues ranging from trade disputes to technological espionage, as well as military posturing in the South China Sea. If military conflict were to occur, its impact would ripple across various sectors of the global economy, with digital currencies being among the first to feel the effects.

Bitcoin is often seen as a safe-haven asset against political and economic instability and may be influenced by several factors:

· Safe Haven:

During wartime, investors typically flock to safe assets like gold. Bitcoin, referred to as "digital gold," may benefit from this shift in sentiment. If war disrupts global markets, Bitcoin may see increased demand as investors seek to protect their wealth from economic turmoil.

· Government Intervention:

The East has maintained an openly hostile stance toward digital currencies, banning Bitcoin mining and trading within its borders. In the event of war, authorities in the East may further crack down on digital currencies to control capital flows, affecting global liquidity and investor confidence. Meanwhile, although the U.S. government is more friendly toward digital currencies, it may impose new restrictions due to geopolitical considerations.

· Supply Chain Disruptions:

A war between the world's two largest economies would disrupt global supply chains. Given that the Bitcoin mining industry heavily relies on hardware from the East, the conflict could severely impact mining operations. A reduction in miners could lead to slower network speeds, resulting in higher transaction fees and decreased confidence in the entire ecosystem.

· Market Volatility:

Digital currencies are known for their volatility. Coupled with the uncertainty of war, this could lead to dramatic price fluctuations in either direction. Traders and long-term holders need to prepare for extreme volatility.

Despite Bitcoin's unique attributes, it is not immune to the broader economic consequences of such events. A war between great powers could have catastrophic effects on global financial markets, adding another layer of uncertainty, but it could also unpredictably drive prices up, with uncertainty potentially wreaking havoc on Bitcoin's value.