First Mover Asia: South Korea Election Made Crypto a Big Issue, but There's No Guarantee of a Follow-Through; Cryptos Suffer Weekend Decline

Good morning. Here’s what’s happening:

Prices: Bitcoin, ether and other major cryptocurrencies had an off weekend as fighting in Ukraine intensified.



Insights: South Korean President-elect Yoon Suk-yeol promised a crypto-friendly administration. Now comes the hard part.

Technician's take: BTC upside could be limited with the potential for higher volatility next week.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.

Prices

Bitcoin (BTC): $37,783 -3.3%

Ether (ETH): $2,512 -2.9%

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Crypto spends a weekend in the red

Russia's invasion of Ukraine raged on over the weekend, and investors continued to watch events with trepidation .

At the time of publication, bitcoin was trading at about $37,800, off about 3% from where it started the weekend. Ether was trading at approximately $2,500, also down roughly 3% for the same period. Most other major altcoins were in the red.

Since Russia began its unprovoked attack, bitcon has risen and dipped within the $37,000 to $45,000 price range that it entered in late January. "It's been another range-bound, indecisive week for Bitcoin and the crypto markets where the market leader has failed to make any meaningful headway on the upside," wrote Joe DiPasquale, the CEO of fund manager BitBull Capital, in a text to CoinDesk. He added: "The current price action is typical during bearish phases, as was seen in May, June and July, and often precedes strong price bottoms."

Cryptos have largely followed the performance of equity markets, which have dropped significantly in recent months and turned particularly edgy as Ukraine turned into a tinderbox. The economic fallout has troubled a global economy that was already struggling to address logistical bottlenecks, workforce shortages for key positions, rising energy prices and wider inflationary concerns. A crypto executive order by the Biden Administration that sent bitcoin into the mid $40,000 range now seems way in the past.

U.S. gas prices rose to $4.33 per gallon late in the week, smashing the previous record of $4.08 set in 2008 during the Great Recession and nearly $1.50 higher than the price a year ago, according to the American Automobile Association (AAA). On Thursday, the U.S. Labor Department's Bureau of Labor Statistics reported that U.S. inflation had accelerated in February to a fresh four-decade high of 7.9%. Investors fear that sanctions against Russia, a major global supplier of oil, could send prices even higher.

Crytpo's weekend performance followed another series of Ukraine horrors. Early Sunday, a Russian missile strike on a Ukraine military training center just 10 miles from the border to Poland killed 35 people, according to multiple reports, and threatened to spread the conflict beyond Ukraine borders. Earlier during the weekend, Russia said that it viewed efforts to supply Ukraine as "legitimate targets." A U.S. journalist was killed on Sunday while reporting from a Kyiv suburb.

Meanwhile, the U.S. and other countries that have condemned the invasion have continued to look for ways to ratchet up their sanctions, and a growing list of major global brands have said they will no longer do business in Russia.

"The teetering of crypto prices near a price point that led to lows over the last month is also related to uncertainty over the military actions between Russia and Ukraine," DiPasquale said. "Just as equities markets have been vacillating, crypto markets have largely done the same."

But DiPasquale said the U.S. central bank's Federal Open Market Committee (FOMC) decision Tuesday on interest rates would be "very interesting for markets."

"Volatility is a certainty, but whether the market will rise or fall will depend on what the Fed comes out with," he said.

Markets

Insights

Housing prices, economic inequality and feminism were issues at the core of South Korea’s recent election – its closest in recent history – and so was crypto.

For both parties, crypto was an unusually noticeable policy plank in an election where arguably more important issues, such as the lack of affordable housing, was center stage in a country anxious about a slowing economy and rising inequality.

The Democratic Party’s Lee Jae-myung pledged to offer a framework for security token offerings (STO) and a national tokenization project that would allow for some sort of social dividend paid out by real estate speculators. Lee also promised a digital asset management and supervision agency.

Yoon Suk-yeol, the conservative candidate who won the election, said he would take legal measures to confiscate crypto profits gained through illegitimate means and return them to the victims."

As the campaign wore on, some of these promises wore out

Lee’s digital asset management and supervision agency was unspecific, particularly how responsibilities would differ and not overlap with the existing Financial Supervision Commission. Eventually, this was toned down in campaign literature to a “monitoring agency.”

For Yoon’s part, his “digital asset promotion agency” didn't have much specificity and was eventually dropped from campaign literature.

The question is, six months down the road when the Yoon presidency needs to introduce legislative motions, will crypto be a priority? Yoon’s campaign has been accused playing on the anxiety of the nation's chauvinistic men regarding South Korea’s rocky economic changes and rising feminism in order to gain a few points at the polls. What’s to say the same can’t be said about his crypto policy?

After all, the Biden administration’s much-awaited executive order on crypto, which was expected to come down harshly on the digital assets industry (many prominent Democrats, such as Massachusetts Senator Elizabeth Warren, aren’t fans), wasn’t much to worry about. In fact, it was a win for the industry.

The point is, when polls are close, politicians will use crypto as a way to score some points with the electorate. Crypto still isn’t mainstream enough to affect the masses like housing prices. It still makes many voters’ eyes glaze over at the thought. It doesn’t hit a nerve like housing prices or income inequality.

Although crypto was important during this contentious election, whether it makes it through to a bill and then legislation that is enacted is another question entirely. There are probably more pressing issues to worry about for lawmakers now that the election is over. 

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