Global macros weigh on Bitcoin’s slide to $40,000, BTC mining difficulty drops

• Bitcoin and crypto remain vulnerable to volatility amid the current geopolitical uncertainty.
• Despite the heavy sanctions, the Ruble-denominated crypto activity has been on a decline.

After its early week pump all the way to $45,000 levels, the Bitcoin price has entered a strong correction today. Along with the broader crypto market, the BTC price is down 5 percent heading to $40,000 levels. On one side, the Russia-Ukraine war demands some monetary easing from the Fed. However, the steep rise in inflation calls for the opposite i.e. monetary tightening.

On Thursday, Russia’s attack on Ukraine’s nuclear power plant had put severe pressure on the crypto space. The European stock market has been facing the biggest pressure of the current situation. Germany’s DAX is down 500 points or 3.60 percent as of writing this story. Market commentator Holger Zschaepitz notes:

From recent high, index has lost 17%, way more than S&P 500. Investors are turning their backs on Europe as the risk of stagflation increases. This means that Europe“s comeback has failed yet again.

Bitcoin which tried to decouple from the broader equity seems trapped once again. The Bitcoin Fear and Greed Index is tilting towards the fear zone. At the current price of $41,500, there’s a lot more uncertainty among market players.

On the other hand, the Bitcoin mining difficulty adjusted corrected 1.5 percent for the first time since November 2021. This was the first negative drop after six consecutive positive difficulty adjustments. The Bitcoin difficulty adjustment occurs every two weeks.

Russian Bitcoin trading volumes on the decline

During the early week rally, many market analysts believed the recent rise was due to the surge in the Russian crypto trading volumes. On the other hand, the narrative was building up that Russia is using crypto to evade sanctions. But that doesn’t seem to be quite holding up the ground.

The Ruble-denominated crypto activity has been on a decline from the first day of Russia declaring war on Ukraine. As per blockchain analytics firm Chainalysis, the Ruble-denominated crypto activity stood at $70.7 million on Feb 24. This has dropped by 50 percentto $34.1 million as of March 3.

Madeleine Kennedy, senior director of communications at Chainalysis said: “This is a fraction of the volume that was seen during the all-time highs of Russian crypto trading volume reached May 2021”. In the Wednesday report, Citi analysts including Alexander Saunders further added:

Russian volumes have been relatively small so far, suggesting that the price action is more due to investors positioning for an expected uptick in demand from Russia, rather than Russian demand itself. It will take meaningful capital flight to move the needle.

We can expect continued volatility amid the ongoing geopolitical uncertainty. On the downside, $40,000 remains strong support. If Bitcoin (BTC) falls below that, we can see a further slide in the range of $33,000-$35,000.