Russian Stocks Crash 13%

In just four months their stocks have lost 35%, from 1933 in October to the middle ages of 1207 as of closing this Monday.

Russian stocks crash, RTSI index on hourly, Feb 2022

As can be seen above we’ve recently seen one of the biggest selloff, coinciding with Britain saying Russia will be cut off the dollar and pound if it further invades Ukraine.

“We’re going to stop Russian companies raising money on UK markets and we’re even, with our American friends, going to stop them trading in pounds and dollars,” the British Prime Minister Boris Johnson said. “That will hit very, very hard.”

Bitcoin is a bit up today, with some speculating maybe it’s because these Russian companies are running to crypto to potentially keep open an avenue to trade.

Russia’s president Vladimir Putin has been piling up on gold since 2018, but you can’t easily transfer that, especially digitally. While bitcoin can easily move, however its conversion to fiat is a potential chocking point.

Another cause of what now looks like a panic in Russian stocks may be that calls are getting lauder to impose sanctions on Russia pre-emptively.

Lithuania has recently joined Ukraine in asking for just that in arguments that may resonate in some of Europe because some of the demands Russia’s president Vladimir Putin has made are an insult and an affront to all of Europe.

He has requested that Europe’s security arrangement through Nato be denied to half of Europe, including countries like the Czech republic and Poland, by asking for Nato membership to be rewinded back to 1997, something that further challenges the peace and security of the EU.

He has also asked for European bases and troops, as well as American and any other Nato member, to be removed from all these countries, including Romania and Bulgaria.

The equivalent of that, if it came from Europe to Russia, would be to ask for the Federation to be broken up, for Siberia, the Caucus and other regions to no longer have Russian troops, a demand that would send alarm bells ringing in Moscow, as it has in the Baltics, Poland and other European nations.

The problem with putting sanctions now however is that a lot of these are not easily if/then. Like if you cut Russian companies from western markets, sure you can put it back on if they remove the troops, but not without potentially a 70% crash first in Russian stocks.

Likewise if you’re going to confiscate Russian owned property in London, which may be one action United Kingdom might take especially considering their security guarantee to Ukraine, it’s not really something that you can then just give back, though you could but these are very serious disruptive sanctions.

Some however have already gone into effect, like the removal of golden visas for Russians to UK, because these are things that you can if/then as its effect is more continuous rather than also containing the element of a sharp cut off.

Russian stocks are also plunging because Putin is not de-escalating, shooting himself in the foot in the process because it isn’t very clear what exactly he thinks he can achieve.

The annexation of Belarus, to the great failure of the German civil service, would be one but if so why not close the matter off with a Biden summit instead of pretending this small man is anything to fear.

The United Kingdom alone spends more on defence than Russia. Just the UK alone can potentially ensure a pretty big defeat if he goes in.

The only fear is more that of the German foreign minister Annabelle Baerbock who wore all black, but the security of Europe is not up for questioning and even the raising of the matter is an insult to Europe.

So he can enjoy his stocks crashing. Russian trade is less than 1% of Europe’s GDP, which makes all this a non matter economically outside of Russia, and a fool that has long passed his time as ruler politically.

Where the global asset of bitcoin and crypto is concerned, it is also not clear just how much influence all this is having as Russia is a fairly small economy of $1.5 trillion, and their median wage is $250, with it potentially adding some demand if Russian companies are going towards bitcoin but we’d be talking at a maybe +$2000 to the price.

Hardly market moving except potentially the speculative element as frontrunning those companies maybe would be worth more than $2,000 to the price.

In addition, there’s always of course the bigger theme of monetary and economic mismanagement which gives a unit of account outside of banking fiat an added value to hedge the risk that a deluded two decade ruling very old dictator makes your ruble fast lose value to now 79 per dollar from 70 in October, 10% down.

For a country like Russia especially, small in comparison to the global economy, hedging local matters with global assets might naturally make sense, and so demand for bitcoin might rise generally but the crypto market cap is bigger than Russia’s GDP, so except as a general theme in guard from dictators, global bitcoin might not care too much about local matters.