What to Expect from the Crypto Market as US-Venezuela Tension Deepens?

Key Insights:

• The crypto market risks losing its recent foothold as the US-Venezuela situation raises tension in the geopolitical landscape.
• A look at how the move by the U.S is tied to the petrodollar and how it could impact the investment landscape.
• Cheap oil versus international order. How the ripple effects of the Venezuela invasion could accelerate the dollar’s erosion and push alternative assets.

The crypto market was just starting to demonstrate bullish momentum before the US-Venezuela situation started grabbing global headlines. The situation is now fueling a surge in global tensions, and this threatens to impact the markets.

Before we get to how this situation could influence the crypto market, it is important to understand what is really happening. The official narrative was that the US captured Nicolas Maduro, the president of Venezuela, and intends to help liberate the country.

While the situation may not have a crypto market angle, critics globally have pointed out that Maduro’s arrest was tantamount to an invasion and kidnapping of the president of a sovereign country.

Moreover, analysts now believe that there were other motives behind the move and that they largely had to do with the Petrodollar.

Why is the US Interested in Crude Oil Reserves in Venezuela?

The crypto market braces for volatility as recent reports emerged that the US’s motives had a lot to do with crude oil. Venezuela has the largest recorded crude oil reserves, which the U.S needs for its crude refineries.

U.S oil production has mostly been light oil, which is not ideal for its refineries.

The pursuit of Venezuela’s crude oil hints that the U.S may be facing some desperate times and it may result in the US dollar losing more value in the coming years.

US oil reserves are near the lowest levels observed since the 1980s. Meanwhile, Saudi Arabia did not renew its oil-related arrangements with the U.S. More countries are now pushing in favor of BRICS, which means they could bypass the need to hold dollars to buy oil.

These developments suggest that demand for U.S treasuries will likely adopt a downward trend as the US loses its grip on the petrodollar. If that happens, then U.S interest rates might skyrocket.

Impact on Crypto Market: Here’s All

The whole US-Venezuela situation has certainly rattled the global markets, and investors are now on edge, waiting to see how things will play out. Analysts believe that these developments may fuel demand for non-dollar-denominated assets like gold.

The expectation of rising rates may lead to outflows from risk-on assets, and this may lead to outflows from the crypto market. On the other hand, the U.S’s decision to invade Venezuela mirrors overreach.

This may encourage investors to put their wealth where it is likely not to be at risk of government overreach. For the crypto market, this could translate to crypto holders moving their crypto from exchanges into private wallets.

Moreover, these developments will likely encourage more adoption of privacy-centric coins. Meanwhile, the writing is on the wall, revealing more details about the fate of the petrodollar.

Bitcoin has proven to be a great hedge against the US dollar’s decline over the long term. This means BTC demand may accelerate now that the recent events have revealed the current state of the dollar.

The move towards Venezuela’s crude oil may offer a temporary relief, but the petrodollar’s long-term outlook remains bleak. The catch now is what the US will do with the closing window before that eventual collapse.

Some analysts believe that the recent focus on the crypto market and tokenization could be part of the US’s strategy for ensuring the dollar’s long-term survival.