The ongoing war between Russia and Ukraine has attracted significant buying interest for Bitcoin and most major cryptocurrencies. On the one hand, Russian oligarchs are likely using cryptocurrencies as a wealth preservation tool and a way to evade financial sanctions, while the Ukrainian side is receiving cryptocurrency donations as humanitarian aid. Therefore, considering the surging demand driven by diverse factors, why does Bitcoin fail to rally?

The Central Bank of Russia (CBR) advised major Russian commercial banks to closely monitor and impose strict limits on cryptocurrency trading to counter the excessive outflow of foreign currencies abroad. Specifically, Russian investors are only allowed to liquidate extremely low percentages of their crypto assets. These policy measures were foreseeable given that Russian citizens held almost $63 billion worth of cryptocurrencies before the invasion of Ukraine.  Thus, with their credit cards being disabled due to global financial sanctions and their government imposing hard restrictions to avoid capital flight, many Russian citizens are left with cryptos as the only feasible way to transfer their funds.

Although Ukraine has swiftly progressed with a new regulatory framework over cryptocurrencies to receive financial support from the West, some large Ukrainian banks have banned their clients from buying Bitcoin. For instance, PrivatBank, the largest commercial bank in Ukraine, has temporarily restricted its customers from purchasing Bitcoin with the national currency, the hryvnia (UAH), aligning with the National Bank of Ukraine's guidelines. These restrictions are anticipated to last for as long as the country is under martial law.

Last Wednesday, the Fed proceeded with its first rate hike since 2018, pushing its base rate up by a quarter percentage point to tackle the persistently high inflation, which reached a 40-year peak of 7.9% in February. Bitcoin and most cryptocurrencies got a boost during the pandemic as stimulus packages and loose monetary policy enabled investors to seek potentially higher returns through riskier assets.

Hence, in an environment of higher interest rates, investors are likely to play defense, preferring lower risk assets that would now start providing considerable returns. Moreover, inflationary pressures are not expected to ease soon, so the fact that Bitcoin has failed to provide shelter against inflation lately seems to be casting a shadow over its near-future outlook.

The European Parliament decided not to ban Proof-of-Work (PoW) crypto mining in the European Union at its meeting last week, despite the increasing concerns over its adverse environmental footprint. Although the crypto community breathed a sigh of relief after the agreement, the EU regulators did not clearly determine whether crypto mining could be classified as a sustainable activity. Thus, miners should be actively looking for renewable energy power sources to avoid future restrictions.

Bitcoin has been rangebound since the beginning of 2022, appearing unable to adopt a clear direction. However, the technical picture seems to be improving as its 50-day simple moving average (SMA) is marching higher and acting as a supportive floor for the price. Additionally, the momentum indicators are also endorsing a cautiously positive near-term bias, with the RSI hovering marginally above its 50-neutral mark, while the MACD histogram is currently above both zero and its red signal line.