In the coming days or weeks, the price of bitcoin and ethereum may move in one of two very distinct ways, according to one analyst.

They might either face their largest price decline of the year or continue to rise from here, never again returning to their lows from the summer of 2022. The latter, according to Uphold’s head of blockchain and cryptocurrency research Martin Hiesboeck, is more probable.

According to him, everything will depend on how the geopolitical situation between NATO, China, and Russia develops. Tuesday saw a decline in both bitcoin and ethereum as the rest of the world’s markets tumbled due to concerns that Nancy Pelosi, the speaker of the US House, visiting Taiwan might considerably worsen U.S.-China relations. In addition, Russia has intensified its operations against Ukraine, and Europe is experiencing an energy crisis.

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“The geopolitical situation is dominating the conversation. Continued war means continued inflation,” Hiesboeck says. “At the same time, we have a situation we have never had before: almost full employment, expanding economy, and yet unprecedented price hikes.”

In the near future, the following two situations involving bitcoin and ethereum might occur:

Investor Comfort With Riskier Assets Continues to Increase

Despite a somewhat worse start to the week for bitcoin and ethereum, the momentum for digital assets is still stronger than it was a few weeks ago.

Tuesday saw bitcoin trading just above $23,000 and ethereum trading close to $1,600; both were down somewhat from their highs from the month’s end. The price of ethereum increased by more than 50% in July, while the price of bitcoin increased by 20%, according to statistics from NextAdvisor. Just last week, ethereum crossed $1,700 and bitcoin nearly reached $25,000. When the cryptocurrency market imploded two months ago and bitcoin fell to a low of $17,500, that represents a considerable rise.

According to Marcus Sotiriou, a market analyst at digital asset broker GlobalBlock, the two biggest cryptocurrencies have reached price levels in the last few days that could continue pushing them higher, especially since the majority of the most recent negative news has already been priced in the market.

Investors became more optimistic that the Federal Reserve might decrease its tightening pace if the economy starts to stall after the Fed boosted interest rates last week and a report indicated that second-quarter U.S. GDP declined. As a result, equities and cryptocurrencies saw a strong bounce, and July ended up being the stock market’s greatest month since November 2020.

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“The Fed is still indeed tightening, and inflation is still at a 40-year high, so we cannot be convinced of a market reversal currently,” Sotiriou says. “But the fact that Jerome Powell has started to say that the rate hikes have had a noticeable impact signals to me that we are in the later stages of this bear market, which we are around 8 months into.”

Technical indicators, according to cryptocurrency specialist and market analyst Wendy O, reveal that bitcoin is on a positive rise in the near term even if the market is currently in a bear phase. For her to turn optimistic in the near future, she claims bitcoin would need to rise beyond $26,700.

Will we be able to do that? I’m not sure yet, but one thing I’ve noticed about bitcoin is that we kissed $24,800 [on July 30] and tried to hold and flip above but failed to do so,” O adds. “We could have a brief retest, but we will then move higher.”

Global Conflict Increasing Drives Crypto Prices to New Lows

This week’s rising global tensions caused investors to once again feel uneasy about taking risks, and since equities and cryptocurrencies are both viewed as hazardous investments, they were particularly heavily hit. Particularly after Pelosi’s trip to Taiwan, tensions rose as China increased its military presence in the region and Russia accused the United States of “provoking” Beijing.

Cryptocurrencies may decline much lower if global geopolitical tensions rise to levels similar to those seen in June, according to analysts. Although July was the greatest month for equities and cryptocurrencies since 2020, Edward Moya, a senior market analyst at trading company Oanda, claims that escalating tensions between China and the U.S., the world’s two largest economies, “won’t boost risk appetite anytime soon.”

Since the beginning of the year, the cryptocurrency market has been strongly associated with the stock market; thus, if equities decline due to the ongoing disputes in the world, cryptocurrencies will probably do the same. In addition, the U.S. economy is battling increasing interest rates, a probable recession, and inflation that has not been this high in four decades. According to Hiesboeck, increased market volatility results from increased political and economic uncertainty throughout the world, and “investors don’t like ambiguity.”

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The July surge, according to Hiesboeck, “was only a pause, driven solely by short-term opportunities and not long-term positioning of big players.”

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Market Volatility and What It Means for Crypto Investors

Cryptocurrencies like bitcoin, ethereum, and others have an equal chance of rising and falling in value. Short-term volatility shouldn’t significantly change your cryptocurrency investing plan if you’re a long-term investor.

Experts advise sticking to the two most well-known and established cryptocurrencies, bitcoin and ethereum, and dedicating no more than 5% of your investment portfolio to cryptocurrencies. Prioritize more crucial elements of your finances before investing in cryptocurrencies, such as putting money away for an emergency, making contributions to a regular retirement account, and paying off high-interest debt. Only invest money that you’re willing to lose, according to experts.

These two examples serve as a helpful reminder that cryptocurrencies are extremely dangerous and volatile investments, even more so than stocks, and that market volatility might increase due to political and economic uncertainties. Even while bitcoin and ethereum have made some sizable gains recently, they are still far from their record highs reached in November.

There is no doubt that there are an increasing number of possible concerns regarding the American economy and the worldwide conflict, therefore experts advise playing it safe with your assets in the interim.