Geopolitical Tensions are High, Liquidity is Low, and Bitcoin is a Reserve Asset

Key Takeaways

  • Markets continue to experience turbulence in the face of growing geopolitical tensions and full-scale war between Russia and Ukraine.
  • We examine recent growth in spreads on major exchanges, highlighting a persistent low-liquidity environment.
  • Option volumes point to the likelihood that many investors are maintaining long positions while hedging risk with derivatives.
  • The market is already questioning the ability of the Fed to raise rates as indicated by a decline in projected rate hikes.
  • We discuss the Terra ($LUNA) blockchain’s adoption of bitcoin as a reserve asset and discuss the resulting implications on algorithmic stablecoins, regulation, and bitcoin as the ultimate reserve asset.
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