Market Recap: Crypto, Stocks Fall After White House Alleges Russian Plot to Stage Attack

Russia-Ukraine tension

The White House has accused Russia of planning a staged attack on Russian territory by Ukrainian forces to gain a pretext for an invasion of the country. The Biden administration's comments on the situation Thursday said that the propaganda could contain "graphic scenes of a staged false explosion with corpses.”

Markets subsequently fell on the news as more uncertainty builds and the potential for military conflict increases. Bitcoin dropped as much as 1.8% on the day, later regaining much of its losses. Ethereum dropped by as much as 4.33% on the day. Ethereum pushed back up as the day progressed but was still down 2.12% at the time of writing.

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Equities markets also took a hit with the increased uncertainty around Russia and Ukraine. The S&P 500 dropped by over 111 points and closed down 2.44%. The Nasdaq suffered even deeper losses, losing over 538 points and dropping by 3.74% by market close.

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ECB monetary policy

The European Central Bank (ECB) released new comments Thursday on monetary policy going forward and how it will deal with inflation. It revealed that it would be reducing the pace of its asset purchasing in the first quarter of 2022 and then aim to cease asset purchases entirely by the end of March 2022.

Inflation rates worldwide are rapidly increasing, including in the Eurozone where consumer prices have risen year-over-year to 5.1% by the end of January. Despite high inflation, the ECB noted Thursday that it would keep interest rates at their current levels in the range of -0.50% and 0.25%. The ECB said that "this may also imply a transitory period in which inflation is moderately above target," in its statement.

Monetary systems around the world loosened policy in order to combat worsening economies from the pandemic. In the US, this has resulted in the most intense increase in the cost of goods and services in the last 40 years. While bitcoin and other disinflationary cryptocurrencies have been considered hedges against this type of inflation, their recent correlation with equity markets have caused them to derail from that narrative.

Top stories

Story: Exclusive: Veteran Blockchain VC Backer Tiger Global Moves Into Crypto Trading

• Tiger has traded decentralized finance protocols, including Filecoin.
• The firm, founded in 2001, invests in both public and private companies.

Story: Bipartisan Bill Proposes Tax Exemption for Small Crypto Transactions

• The Virtual Currency Tax Fairness Act would exempt personal transactions made with virtual currency when the gains are $200 or less.
• Rep. Suzan DelBene (D-Wash.) and David Schweikert (R-Ariz.) introduced the bill two years after proposing legislation with the same name.

Story: Wash Trading, Which Inflates NFT Prices, Growing ‘Area of Concern’ for Traders

• Wash trading is used to artificially raise the price of NFTs to pump the asset’s value.
• Analysis of NFT sales indicate some sellers executed hundreds of wash trades last year.

Story: Fate of ‘Millions of Taxpayers’ Hangs in Balance of IRS Crypto Staking Case

• After the IRS offered to refund a Nashville couple for taxes paid on unredeemed rewards from staking on the Tezos blockchain, industry experts weigh in about a potential new tax precedent.
• The couple has refused the refund, hoping that moving forward with the case will help to establish a precedent for taxing staked tokens.

Going forward

Markets are filled with uncertainty awaiting increased rates and fewer asset purchases from the Fed. The tension between western nations and Russia creates even more pressure that may lead to an extremely volatile move downward should the situation worsen. Investors should prepare for future volatility.

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