Dear readers,
While I attempt to bring you as much timely analysis as possible, sometimes I need, well, more time. Starting with Russia and Vladimir Putin.
I’m not a Russia or Putin expert. Far from it. My geopolitical focus for years has been on China’s rise and the technology cold war between the US and China that accelerated during the Trump administration and originated during the Obama administration’s “pivot to Asia.” The events of the past week were a friendly reminder that no matter how much analysis I do, there’s always a blind spot, and there’s always room to learn. I’m bringing myself up to speed on Russia, but in the meantime, here’s some initial analysis with regard to bitcoin, of course.
It’s hard to imagine American leaders saying “let’s test Putin here” and actively pursue military action. Western retaliation will be financial. We’re already seeing this—the loudest cries are for banning Russia from SWIFT, the world’s interbank wire transfer network. For now, Russia will keep its access:
Other sanctions and economic weapons are being deployed against Russia, coming from the US, UK, and Europe. This will undoubtedly bring bitcoin into the conversation.
Bitcoin adoption happens at the margin, meaning some, but not all, transactions previously conducted using traditional financial rails will migrate to bitcoin. If one oligarch, one bank, or one middle class family decides to join the bitcoin network because of financial restrictions, bitcoin has picked up its next marginal adopter.
Russian oligarchs migrating to bitcoin, even if it’s less than a handful of people, will certainly resurrect bitcoin critic’s spirits. At that point, we’ll hear the mainstream media calling bitcoin Putin’s new weapon. While this might be narrowly factual, we must resist the media’s incomplete analysis. Bitcoin potentially becomes Putin’s new weapon only because it is nation-grade technology, and the network cannot be stopped by any entity whatsoever.
Ukraine’s military is also taking note of bitcoin’s ability to empower any entity to participate in global crowdfunding efforts that cannot be censored:
Escalation in Taiwan occurred almost simultaneously. I’m early in speculating, but are we thinking that China might be using Russia’s invasion of Ukraine as cover to engage with Taiwan? The events in Hong Kong over the past few years foreshadow difficult times ahead for residents of Taiwan, but I consider predicting the timing of a Chinese/Taiwanese engagement an impossible task. Rather than predict, I observe.
The brazenness of China’s primary English-speaking media personality regarding Chinese air force flying over Taiwan shocked me a little. China is not being shy:
A Fed rate hike is still on for March. We probably won’t see a 50 basis point hike, but this idea that a Russian invasion will cause the Fed to reverse its commitment to fight inflation is wrong. More on this to come.
Bitcoin held an absolutely massive level of ~$34,300 today, making a higher low relative to the January 23rd low of $32,900. But Nik, you said daily candles are too “zoomed in”! I know I’m sinning here today by zooming in too closely, but take a look at that beautiful daily candle. Higher low, huge wick off support, and reinforcing the current mini-uptrend:
Here are two Substack publications to which I subscribe, Adam Tooze’s Chartbook and Bill Bishop’s Sinocism (Bishop is an investor in Substack). Tooze is a geopolitical master and is always somebody I read as a reference point, and Bishop is a China expert that provides the Chinese perspective to global events. I recommend subscribing to each’s free edition, at the minimum, if deeper geopolitical analysis is something you require. Tooze’s post today is free. Bishop’s is not, but here is the link to the article he cites on China’s Ukraine stance.
I take great pride in my research and analysis, which means owning when I missed something or have incomplete context to provide an informed opinion. Over the coming days and weeks, I’ll spend more time on Russia and Putin if the markets require it. Especially if Fed speakers hit the news wire with any mention of Ukraine and short-term rates markets rapidly adjust from current levels. Stay tuned.
Until next time,
Nik