The Signal: Digital Gold Encrusted Case

The Market Signal

What’s driving volatility?

The case to be made for and against cryptocurrency couldn’t have a more fertile testing ground. 

When the war first began, there were those eager to cast doubt on “digital gold,” pointing to physical gold prices soaring while Bitcoin, Ethereum and other major cryptocurrencies sagged. 

Fast forward less than a week, and the narrative shifts – cryptocurrency is celebrated amid all-time highs Tuesday as measured by addresses owning Bitcoin and Ethereum. Volumes also spiked in Russian ruble and Ukrainian hryvnia-denominated exchanges. All in the face of declining governments, restrictive payment rails, economic restrictions and a desperate populace. 

“The investment case for crypto has never been stronger,” Andrew Pesco, head of Investment Strategy at Domain Money Advisors, LLC (“DM Advisors”) said, pointing to growing adoption of blockchain technology, be it through notable new hires at Disney for the metaverse or billions raised for new investment funds earmarked for  tokens and scaling ecosystems. Even Twitter added a tipping option for Ethereum addresses, Andrew added – a ‘real world’ example of growing adoption.

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Where is money going?

Andrew also points to recent funds being raised for Ukraine – at least $20 million at this point – as among the other growing uses. And it’s not just humanitarian aid. Issues obtaining and transporting hard currency are leading rationales behind heavy ruble-denominated flows into Bitcoin earlier this week (the highest since May). Ukrainians too are seeking crypto, according to hryvnia flows on the Binance exchange.

Asset prices responded in kind to start the week, with major cryptos Solana, Terra (LUNA), Bitcoin and Ethereum recording double digit gains. LUNA, to be fair, is riding momentum from late February when it raised $1 billion to fund emergency reserves to maintain stability in times of volatility. Serendipitous timing to be sure, but also helping to catalyze a 75% weekly gain. Use of Domain Money’s Signal** pointed to social sentiment soaring in the name last week. 

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The Data Signal

Is the market just about war?

Reading the tea leaves, you’ll see the war is less about the simple ‘risk on, risk off’ sentiment moving from one headline to another. There are underlying trends being carved out each day.  

As this guide briefly illustrated last week, there were assets in which to hide, and assets that may be poised to ride the momentum of investment.  We discussed last week how moves in large solar-exposed names like Enphase Energy and SunRun may be signs of a greater sea change in investment as countries seek alternative energy sources. Those two stocks tacked on gains of 8% and 10% to start this week, while other players like Sunpower, First Solar, and even alternative energy stocks like FuelCell and Ballard Power joined the fray with double digit gains. 

Money chasing these investments also works along the supply chain, as electric vehicle manufacturers also benefited from the sentiment. Tesla, for one, jumped 7% Monday in one of the few bright spots for the market (competitors Rivian Automotive and Nio also recorded strong days, despite poor financials for EV maker Lucid). 

The other sectors, like energy and the military complex (Lockheed Martin, Boeing, Raytheon for example) were the only other pockets of green for the lion’s share of trading. This trend largely continued Tuesday.

OPEC isn’t expected to surprise anyone with its monthly meeting Wednesday, but with crude oil prices at 8 year highs and public sentiment against Russia, watch for indications of new supply which could hamper the pace of oil gains. 

Check Prices of Assets You can view key indicators in the app in the asset detail screen by selecting an asset from the home feed.