Russia Continues to Influence the Global Energy and Crypto Markets

Newsletter of the week 2 September - 9 September. In this week's newsletter we cover Russia's influence on Europe and the crypto market, The Ethereum Merge, Bitcoin's price action, and QQQ's price action.
by Yoaquim Boom
October 2, 2022

In this week’s report

  • Russia to legalize crypto payments for international trade.
  • The energy crisis is becoming evermore evident, here is what EU governments are planning.
  • The Ethereum Bellatrix update launched, marking the first step of many on the path to the merge.
  • Bitcoin catapults off 18500 lows, eyeing 22000.
  • QQQ bounces off support, likely leading the broader markets.

Russia Legalizes Crypto Payments for International Trade

Russia is close to passing legislation for the use of cryptocurrency in international trade since it is currently “impossible to do without cross-border settlements in cryptocurrency”.

According to TASS, a local news outlet, the Bank of Russia and the country’s Ministry of Finance have agreed that they will have to reconsider their positions toward cryptocurrency.

Russia seems to be looking for alternatives to the U.S. dollar in order to guarantee the efficient trade of their many commodities.

Historically opposed to the idea of using crypto as a payment method Russia seems to want to allow crypto payments due to the current widespread western sanctions upon Russia.

The necessary regulatory framework will still need to be introduced.

The European Energy Crisis and EU's Consumer Protection Plan

The aforementioned energy crisis continues to burden citizens world wide. The fears of a gray cold winter in the coming months looms especially over countries in Europe.

The European Central Bank and Bank of England have announced they are likely rolling out “energy bailouts.”

“Finland has warned of a 'Lehman Brothers' moment, with power companies facing sudden cash shortages” (Bloomberg).

UK’s newly appointed Prime Minister, Liz Truss has recently revealed a plan as a response to rising consumer energy bills. The ‘stimulus package’ type plan could cost up to £130 billion over the next year and a half.

The plan would be roughly 5.9% of UK’s Gross Domestic Product.

The U.K.’s stimulus at 5% of GDP would roughly be the equivalent of a $1 trillion stimulus package in the United States.

The total energy crisis is currently projected to cost the continent of Europe approximately €2 trillion, or 15% of GDP in the coming 24-48 months.

With the Great British Pound (GBP) and the Euro (EUR) substantially falling in evaluation against the US dollar in tandem with the gas crisis, it poses a significant threat to the citizens of the implied countries (See Fig.1).

Gas prices have increased by as much as 4x since the beginning of the year (See Fig.2).

The gas crisis affects not just Europe, but the largest Asian economies are also importers of energy and natural gas.

Even China and Japan are being greatly affected and setting up security measures in the name of the safety of their citizens.

Some consumers and politicians are arguing that government should monitor gas prices and cap them. Although this also poses many problems.

Helge Haugane, Equinor’s senior vice president for gas and power, specified the problem of global price policy in an interview recently, stating:

“Power is a local, i.e. domestic, market, so in this case, it would be possible to do something governments could control … But the issue of a gas price cap is different, because the natural gas market is global, and hence not that easy to manage.”

The central issue with the governing of gas prices is a lack of supply, price government will not affect the supply of gas, wherefore it wont ease strain.

Fig. 1 1M EURUSD 1999 - 2022 (TradingView)
EURUSD downtrend since 2008 with likely support at 0.90

Fig. 2 Gas Prices EU 2020 - 2022 (BloomBerg)

Ethereum's Merge Bellatrix Upgrade

The Merge has officially been set to happen on the 15th of September. Although there is somewhat of a range, 15 September is when most experts expect the long-awaited merge to occur.

The Bellatrix hard fork, the final upgrade ahead of the Ethereum merge has officially been activated on Tuesday the 6th of September.

Currently, the Ethereum mainnet (PoW) and the Beacon Chain (PoS) operate in tandem. The Bellatrix upgrade aims to ensure validators are producing updated Beacon Chain blocks that will incorporate and work with the PoW code adjustments ahead of the Merge.

Although the upgrade is only a small step, it is the beginning of the merge process.

A few hiccups should certainly be noted within the Bellatrix upgrade.

Around 5% of the Beacon Chain’s validating nodes failed to update in time, but that seemed to have no major effect on the network. And Ethereum network users also noted that there was a one in ten missed block rate across 600 blocks post-Bellatrix upgrade.

Most of these issues should be easily remedied, but they certainly could be seen as warning signals for what may go wrong when the merge actually occurs on the 15th of September.

Read more on 'The Merge' here

Bitcoin Price Analysis

Bitcoin's heavy drop since its rally peak on the 15th of August has seen continued downside for investors.

The bottom of the continued downside was found around the June real-candle lows at 18500.

So far Bitcoin has put in a significant rally of over 15% since its tap of the lows.

Bitcoin seems to be forming a range between 19000 and 22000, with the current rally having strong support ahead of itself at 22000.

Investors should take care at current prices in light of a likely consolidation around 21000, whereafter we can see the continuation to the 22000 resistance mark.

Fig. 3 12H BTC Jun 2022 - Sep 2022 (TradingView)

QQQ Price Analysis

The QQQ with has been shown to be a market leader in bull and bear moves since 2020.

The QQQ has seen a clean bounce off the 295 level, which was its July breakout resistance level which also served as support for the post-breakout retest.

Although the current bounce has not seen immensely significant gains, it is still likely to see some follow-through in the coming days.

The point must be made that the FOMC has a meeting on the 21st of September in which the likelihood of continued rate hikes is high.

More rate hikes mean a high change on a widespread market dump, a cautionary tale that has saved many investors a lot of funds in the last few months.

Fig. 4 4H QQQ Apr 2022 - Sep 2022 (TradingView)