Full Disclosure: The Author [Richard Ronc] has no cryptocurrency holdings.
Chronologically, it’s about time for my annual crypto bashing session … well not really.
Crypto currencies just do their own thing … or do they? (referencing Bitcoin and Ether only) the last 6 months of history does appear to show some insight into not just what crypto currencies do, but what they might also do in future. But at a rudimentary level, there are some interesting things to look at.
Firstly Bitcoin and Ether, do appear to be somewhat coupled to each other. Secondly they seem to be relatively inverse to the bond yields and lastly … over the last 6 months they actually appear to be somewhat coupled to equity indexes, such as the NASDAQ (in this case).
But as unpredictable as crypto currencies are and can be (there is too much to go into here), supply and demand are king; and at present, the potential conditions & demand for crypto currency could be primed for growth in a way that we haven’t seen yet.
Why do I say that?
There has also long been the call that crypto is used by criminals … a call that – even as a former crypto trader … I disagreed with, not because I didn’t think criminally minded individuals didn’t use crypto, but to the contrary; there are more criminals that use cash and other ‘currencies’ for payments, making it a dismissible comment outright … until the recent rise of tyranny; naturally the type of world event that warrants every one with a platform to have an opinion. (myself included)
Tackling such an unhinged, paranoid and frankly delusionally dangerous person such as Vladimir Putin, comes with a swath of risks.
Any actor outside of the Ukraine; part of NATO, that gets involved in a shooting or ‘Hot’ war, would trigger the definition of a world war. One in … All in. Article 5 and all … taking on the Russian military with kinetic warfare … isn’t a viable, favorable or an ideal option.
At present the war is and can be fought on a number of fronts. One angle could be reduce the morale on Russian troops (seems to be happening already). The odds are better than good, that Russian troops have been fed a steady diet of ‘Dis-information’ and there will be some seeds of doubt taking hold.
There is the logistical angle, a few thousand tanks, needs a hell of a lot of fuel, and logistics support, so there is a huge requirement to keep those lines open. Disrupt those, and you shut it all down.
There’s other angles, such as cyber warfare, and the one we all already know about … economic warfare on the Russian economy; impacts from ‘sanctions’ that have hit the average Russian civilian with immediate and devastating effect.
Of course there is their energy sector … but … yeah … well
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So … what exactly are sanctions?
By Definition, a ‘Sanction’, can be a ‘threatened penalty for disobeying a law or rule’ or ‘official permission or approval for an action’
Yeah … well; here they are. Without having gone into the fine detail (a.k.a. listening to the news) … in essence, the majority of the sane world has given Russia the proverbial bitch slap of excising them from SWIFT, and removing their ability to use US Dollars … except of course their energy sector which is exempt, brilliant stuff there [sarcasm].
The sanctions in effect, all but remove Russian industry from the world economy, and in a world which is so globally linked, the results (for some) have been immediate. The Rouble, has crashed, the population is going on bank runs, banks have doubled interest rates, their stock market won’t open … but more than anything, without US dollars (as an example) able to come in, people & businesses linked to employment or trade outside of Russia … can’t get paid or pay.
Or can they?
Related: Why Open Source [Crypto] is Going Nowhere … Yet
The ability to go around them
Before I go on, it is important to distinguish that the Russian People are not Vladimir Putin – the ultimate target of such sanctions. However in saying that, the Russian People are ‘in effect’ the collateral damage to apply pressure to help bring the conflict to an end.
But with blockchain technology able to circumvent central banks … if there were ever a time for mass adoption of crypto currencies now would surely be the time, after all … the Russian people’s way of life … practically depends on it.
One source, has already reported that trading volumes between Russian Roubles and Crypto currencies has tripled … I’m not the only one who saw this apparent loophole. Adding to this, comments have already been made about how crypto currencies are weakening the sanctions that have been put in place.
Politically and economically, the situation only gets more complicated.
Related: Why a bank is the worst place to have your money
Visibility on the blockchain
This is admittedly starting to get more than a bit beyond my understanding …
The referencing from bitcoin.org … you can still be found indirectly whilst still trying to hide on the blockchain. This … might come as a bit of surprise to some. Ultimately all transactions are ‘Public, traceable and permanently stored in the bitcoin network’, Once an address (wallet) is used, then it is forever recorded on the blockchain itself. Should your identity ever have to be linked to a transaction, the address can no longer truly remain anonymous.
The website even suggests to use a different wallet for each transaction …
Regulations (in some countries) already mandate that some exchanges verify the identity of their account holders before they are allowed to setup wallets. So in order to be truly anonymous and invisible without showing up on the blockchain too often, it would nearly be impossible (all but unfeasible for an individual) to create enough accounts, with enough credentials to stay under the radar.
Related: Why you should not trade Crypto
The Implications of regulations on blockchains.
“We are not going to unilaterally freeze millions of innocent users’ accounts,” a spokesperson for Binance, “Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people’s access to their crypto would fly in the face of the reason why crypto exists.”https://www.cnbc.com/2022/02/28/binance-will-not-block-russian-accounts-after-ukraine-request.html
I know it’s taken a while … but here lies the current dilemma.
Up until just recently, crypto currencies were like many other modern innovations, where the vast majority of people used them ‘as intended’ whilst there have always been numerous and various actors who saw its potential to be used in other ways. As far as arguments go; this is nothing new. It is known and just like any sort of financial crime, it is all but accepted that s*** happens. After all, there are (probably) far more con-artists targeting the elderly, than war-lords selling thermobaric weaponry with crypto-currency.
However, up until last week – we’d never needed to … so decisively supress an economy in order to snuff out and starve such an insane act of political & military lunacy. And in saying that, as I’ve said before; here we have the ‘darker side’ of the idealistic vision of decentralised money.
Governments themselves may not have control over any token, and it seems that the only people who ‘may’ have any form of control whatsoever are the exchanges themselves; who now find themselves in the precarious position of;
Staying true to the foundational values of crypto and leaving pathways around global laws open to exploitation (potentially setting dangerous precedents for other nations to establish plans for future hostilities) or … Doing the impossibly hard work, of targeting and isolating wallets belonging to people, companies and other entities that enable and support political and military tyranny.
Perhaps there could also be a silver lining. The rouble has lost so much value, that crypto currencies have jumped proportionally, making sufficient volumes all the harder to acquire. Who knows!
The only thing for certain, is that crypto is facing its next test, and this time it’s about what is ‘right’.
Let’s Go Brandon
Related: So … how is your relationship with risk?
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