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HEALTH, WEALTH, AND HAPPINESS |
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| “Peace is more precious than diamonds or silver or gold.” —Martin Luther King, Jr. |
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| Hi Everyone,
Once again, war is upon us. So far, I have not heard a single person supporting the Russian invasion of Ukraine or buying into Russian President Vladimir Putin's narrative that this is somehow justified.
Heck, there are even Russian citizens out on the street protesting today, despite the harsh punishments for those who speak out against their leader.
Nevertheless, despite the unbelievable nature of the events this week, it really is happening, and we're all dealing with it in our own ways.
In this newsletter, we'll do our best to put things into perspective from a markets point of view. Perhaps rightfully so, the biggest fallout so far has clearly taken place in the Russian markets. Not only has the Moscow stock market lost one third of it's value, the ruble reached an all time low against the U.S. dollar, and Russian bonds have been rendered completely worthless by Switzerland's UBS Group, apparently triggering massive margin calls.
To be clear, there are other participants in the market still willing to pay for Russian bonds, but UBS, along with one other Swiss lender, will no longer accept them as collateral.
You know things are really messed up when Swiss financial institutions start taking sides. |
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| Ukraine frozen
If you thought Europe was suffering from an immigration crisis before, today's events could very well make it 10 times worse, as everyone who is able to do so is fleeing Ukraine.
Current Pentagon estimates expect up to 5 million refugees to arrive in neighboring countries. |
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| Those fleeing, however, may find it difficult to acquire resources, with massive lines forming at gas stations and martial law imposed on local banks.
At the moment, ATMs are up and running, but there is a cash withdrawal limit of 100,000 Ukrainian hryvnas per day (approximately $3,350 at current levels). As we know, bitcoin fixes this.
Demand and Ukrainian pumps, however, are probably not the main reason why U.S. crude oil hit over $100 a barrel today.
We've already heard several analysts willing to go out on a limb trying to cite the current conflict as a potential source of inflation, a notion that seems preposterous to me, since the conflict just started, whereas inflation has been running hot for months.
In my mind, it's inflation that's driving up oil prices, not the other way around. |
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| How does this affect bitcoin?
I could not disagree more with the common narrative that bitcoin is falling because of the Ukraine conflict.
The logic that analysts are using is that bitcoin is a risk asset, like stocks, and therefore it is declining due to uncertainty. This doesn't make much sense to me.
What kind of HODLer would be enticed to part with their bitcoin due to geopolitical uncertainty?
Sure, there are probably more than a few cowboy fundamental margin traders out there who are willing to join the trend, and that can often turn the markets into somewhat of an echo chamber.
However, there's no sound fundamental explanation, other than pure speculation, that I can think of to explain why anybody would sell bitcoin because Putin is invading Ukraine. In fact, I think it's the opposite.
Markets often act irrationally, but overall, they are usually unmoved by major geopolitical crises. As evidence, I would like to submit this article from 2014, when Russia annexed Crimea. |
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| Sure, the scale of the invasion is a lot larger this time, but the article does a great job of discrediting the notion that geopolitical crisis moves markets and that any such movements are often reversed in short order.
We don't know how long this conflict will last, or how things might be affected long-term, but in my mind, all the uncertainty only increases my inclination to own bitcoin, and I'm pretty sure that I'm not the only one who feels this way.
Bottom line, bitcoin and the stock markets continue to move down due to Federal Reserve policy tightening. Headlines and the mere shock of what's happening in eastern Europe may have exacerbated the moves, but they are probably not the root cause.
How much would assets start rallying if we suddenly received word from the Fed that it is going to reverse course?
Wishing everyone a peaceful weekend ahead! |
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| Mati Greenspan Analysis, Advisory, Money Management |
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| Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It is created by Evamarie Augustine, Charles Bovaird, Mati Greenspan, John Hargrave, and Alexandre Lores.
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