Crypto newsletter: Bitcoin tumbles below $38,000 amid rising tensions on the Ukraine-Russia border

• Geopolitical tension in Ukraine weigh on market sentiment
• Cardano network witnesses massive growth
• Ethereum dominance may diminish, according to Morgan Stanley

The past week was another negative one for the cryptocurrency market as escalation of the geopolitical tensions over potential Ukraine-Russia military conflict and the expected first interest rate hikes by the FED weighed on the market sentiment. Cryptocurrencies launched today's session slightly higher on reports of a potential Biden-Putin summit. However early gains were erased as reports of fighting between Ukrainian army and Russian-backed separatists continued to surface. Also Russian officials announced that there are no concrete plans for the Biden-Putin summit. Bitcoin's market dominance increased to 41.5%. The capitalization of all digital assets in circulation fell to 1.71 trillion, while an average daily trading volume is registered at $68.80 billion.

Bitcoin:

• Babel finance believes Bitcoin may take cues from growth stocks and chalk up a new bull run in the second half of the year. According to the analysts growth stocks have been the worst-performing sector in the three months before and after the first rate hike. "Given the current strong correlation between bitcoin and growth stocks, especially the synchronized downward trend of the two assets since December, we believe it may be difficult for bitcoin to move upward direction in the three months following the first rate hike," researcher at crypto financial services provider Babel Finance, Robbie Liu told CoinDesk in an email. Bitcoin's correlation with the U.S. stocks recently hit a record high of over 0.75, according to data analytics firm IntoTheBlock. Liu believes that price will resume upward move once the market adjusts to the pace of the Fed's rate hike. 

Value stocks tend to outperform growth stocks three months before and after the Fed kicks off rate hike cycle. Source: Babel Finance

• European Union is willing to adopt cryptocurrency if certain regulations are put in place to prevent illegal and fraudulent activity. 
• President Biden expected to issue executive order on crypto and CBDCs this week directing government agencies to study different aspects of the digital asset space with the goal of creating a comprehensive regulatory framework.

• The fear and greed index is considered an indicator of trader sentiment across the cryptocurrency market towards Bitcoin. The indicator is signaling “Extreme Fear” among market participants. Historically, excessive fear has resulted in Bitcoin trading well below its intrinsic value, however some analysts predict further correction in the asset’s price due to ongoing geopolitical tensions. 

The Crypto Fear & Greed Index fell to 25, which corresponds to the "extreme fear" mode.Source: alternative.me

• Bitcoin network has hit yet another all-time high in mining difficulty after a steady climb since last July’s lows. A greater hash rate, however, means greater security for the network. The more hash power the network uses, the more distributed the work is for each transaction that takes place on-chain.

Bitcoin mining difficulty jumped to a new high of 27.97 trillion hashes (T). This is now the second time in three weeks that Bitcoin (BTC) has hit a new ATH in terms of difficulty which is usually supportive for prices. Source: Coin Warz

Bitcoin price broke below major support zone around $40000 over the weekend and selling pressure intensified on Monday. Sellers pushed the price below local support at $38000 which coincides with 78.6% Fibonacci retracement of the upward wave launched in July 2021. Next target for sellers is located around $36000. Source: xStation5

Ethereum:

• Morgan Stanley recently argued that Ethereum’s dominance could diminish as strong competitors emerge.
• Ethereum further faces competitive threats, scalability issues and complex challenges compared to Bitcoin.
• The investment bank believes that Ether could become more volatile than Bitcoin. 
• Second most popular cryptocurrency may lose its dominance as the network faces more competition in the smart contract market than Bitcoin faces in the store-if-value market.

Ethereum launched today's session higher, however buyers failed to break above major resistance at $2800 which coincides with 23.6% Fibonacci retracement of the last downward correction. Price took a hit following fresh news regarding Ukraine-Russia conflict. If current sentiment prevails, local support at$2485, which coincides with lower limit of the descending channel, may be at risk. Source: xStation5

Cardano:

• Cardano’s total value locked (TVL) has recently neared $200 million as the network continues to grow in the DeFi sector.
• Projects built on the network have also significantly risen over the past few months following the launch of smart contracts. Currently 492 projects are being build on the blockchain, compared to 175 projects in late December.
• Currently, there are around 120 active daily contributors working on the development of the network, as Cardano remains the top three most actively developed networks among prominent blockchains.

Cardano price failed to break above psychological resistance at $1.00 and is currently testing major support at $0.9150 which coincides with lower limit of the wedge formation. Source: xStation5