Heightened invasion fears has Wall Street selling everything, US data, bitcoin tumbles

US stocks did not stand a chance today as risk aversion violently returned on growing fears of a Russian invasion of Ukraine and after an impressive earnings report from Walmart suggested the consumer is strong and paves the way for potential aggressive Fed tightening.  The risks for a military conflict at the Ukraine border appear to be rising and that has many investors entering de-risking mode. Wall Street is feeling very jittery as it looks to the left and sees intensifying geopolitical risks with the Ukraine situation and then it looks to the right and sees the potential for aggressive Fed tightening.

US data

Earlier this morning, initial jobless claims and the Philadelphia Fed business outlook disappointed, while the housing market still looks strong.  The Philly Fed showed there was a slowdown in activity and that the employment index continues to provide rising wage pressures.  Supplier delays improved and that is a big positive for traders focused on bottleneck issues.

Housing starts weakened for the first time in four months, while building permits surged to the highest level since 2006.  The housing market still has a low inventory problem and the higher mortgage costs have not derailed buyers.

Bitcoin slides over Ukraine, Fed

Wall Street has gone full de-risking mode and Bitcoin is paying the price.  Fears over geopolitical concerns and potentially aggressive central bank tightening has cryptos across the board in freefall.  The risk rebound that was accompanied with the major de-escalation that stemmed with the Ukraine situation that happened earlier in the week has completely been unwound now that many in the West fear Russia is moving towards an imminent invasion.

Bitcoin is the ultimate risky asset, and a Ukraine invasion would keep crypto selling pressure going another 10-15% over the short-term.  The outlook for bitcoin remains mostly bullish but if long-term growth prospects start taking a bigger hit from aggressive Fed tightening, institutional investors might scale down their bets.

Weighing on cryptos was the news that President Biden is expected to issue an executive order on regulating cryptos and on a central bank digital currency (CBDC) next week. Uncertainty for stablecoins is a short-term negative for cryptos, but overall long-term growth for the cryptoverse will embrace US regulation.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya