Federal Reserve Chairman Jerome Powell testified during a House of Representatives Financial Services Committee hearing on Pandemic Response oversight of the Treasury Department and the Federal Reserve at the Rayburn Building on Wednesday, December 1, 2021.
Tom Williams CQ-Roll Call, Inc. | Getty Images
If you want to see how difficult it is to be Federal Reserve Chairman Jerome Powell, check out the contrasting comments from Cleveland Fed President Loretta Mester and former Dallas Federal Reserve President Richard Fisher.
Asked on our air today what the central bank should do in response to the crisis in Ukraine, Fisher said: “I would not respond to what is happening in Ukraine, mainly because we do not know how long it will last.”
At the same time, Mester spoke at a conference at her organization, where she said that the crisis in Ukraine “has consequences for the economic outlook, adding increased risk to inflation, even when it risks lowering the growth forecast.”
These contrasting comments underscore Powell’s dilemma.
Both mandates: Which one gets the advantage?
The Fed has two mandates: it must help the economy grow and it must fight inflation.
Matt Mali of Miller Tabak notes that “the crisis in Ukraine has the potential to slow growth, so the Fed probably has to go slow in raising interest rates. But the crisis is also fueling inflation, so the Fed can’t ignore that.”
Who has the advantage? How does Powell cut this needle?
Mailey believes that Powell will take the “middle way”: he acknowledges fears of growth, but will continue the course to raise interest rates.
“We have a situation where Powell and the Fed have mistaken that inflation is transient, so they have to raise interest rates, otherwise they will lose confidence.
However, “the market now believes that the Fed will not be as aggressive as they were even a month ago.” Mali believes an increase of 50 basis points in March is unlikely. He says the central bank will make 25 basis points in March, but they will leave at least four more table increases for the year.
Mali is particularly concerned about signals from the bond market and what it suggests for potentially lower growth.
“Yields are much lower than they were last Thursday when the war broke out, but the stock market is no lower. Someone is wrong, either the bond market or the stock market. growth. “
The problem for stocks: Lower growth means lower profits
Shares are driven by a combination of three factors: dividend growth, profit growth and market ratio (price-earnings ratio), which is a reflection of how much investors are willing to spend on future earnings.
Almost all of the stock’s decline this year is due to multiple compression: the S&P 500 is down nearly 10 percent, while the market multiplier has also fallen about 10 percent, from about 21.1 to about 19.1.
At the same time, the distribution of dividends has slightly increased, while earnings expectations remain roughly the same.
Analysts expect earnings growth of 7.8% for the S&P 500 in 2022, just below expectations of 8.4% at the beginning of the year, according to Refinitiv.
Others express the same concern as Mali: that the crisis in Ukraine and its subsequent inflation will take a second step down stocks.
Nick Reich of The Earnings Scout notes that this second step down may not be due to a downturn in the market, but to a real downturn in earnings forecasts because rising Fed interest rates will slow the economy.
“We don’t know how long the Fed will need to raise interest rates to curb inflation,” Reich told customers. “While some companies forecast eight interest rate hikes this year, our study shows that four hikes will stop inflation. This is good news. The bad news is that it will probably come at the expense of future growth. “
“In the next few months, there is likely to be a fear of growth,” he said.
You may even start hearing the “R word” [recession]which shares are not discounted. “Reich noted that if estimates in the second half remain stable in the coming months,” we could become less bearish or even bullish. “
Furthermore, we also do not know how long the war in Ukraine will last and what economic sanctions they will have on the economy.
“The question is, how does the Federal Reserve create a soft landing?” Mali asked me. “It’s not clear if they can.”
Austria’s operations with Sberbank, Russia’s largest lender, must go bankrupt as its Croatian and Slovenian stakes are transferred to new owners by the EU’s body responsible for restructuring bankrupt banks.
The move was announced by the EU’s Single Restructuring Council on Tuesday night, making Sberbank’s Austrian branch the first bank victim of large-scale sanctions imposed on Russia in response to its invasion of Ukraine.
SRB has already halted most of Russia’s state-owned bank’s activities this week after customers rushed to withdraw money in response to Western sanctions.
SRB said on Tuesday that it has decided to transfer all shares of the Croatian subsidiary of Sberbank to Hrvatska Poštanska Banka, while its Slovenian division will be transferred to Nova Ljubljanska Banka. It says the two banks will open on Wednesday.
“SRB also decided that no restructuring was needed for the Austrian parent of Sberbank Europe AG,” he added. “Insolvency proceedings will be conducted in accordance with national law. Eligible deposits of up to EUR 100,000 are protected by the Austrian Deposit Guarantee Scheme. ”
This is only the second time SRB has taken control of a troubled bank since it was established in 2015 as a pan-European body with powers to impose losses on shareholders and junior bondholders of bankrupt creditors in a bid to evade government bailouts in the sector. .
The last time SRB took control of a bank through a formal restructuring process was when it organized the sale of Spanish Banco Popular to its rival Banco Santander for 1 euro in 2017.
Sberbank Europe has about 800,000 retail and corporate customers in Central and Eastern Europe, with almost 4,000 employees and total assets of € 13 billion. The Russian bank set up its European subsidiary when it acquired Austria’s Volksbank International in 2012.
Sberbank Direct, its online banking operation, has sought to expand its deposit base by offering German depositors 1.5% interest rates on their money – much higher than the near-zero interest rates offered by most local lenders.
Last year, however, the Russian bank agreed to sell its operations in Bosnia and Herzegovina, Croatia, Hungary, Serbia and Slovenia to a consortium of banks led by Slovenia’s AIK Banka. But the deal was not completed and was undermined by the collapse of Sberbank’s operations in the EU.
Today, Rivian announced several significant price increases for its R1T electric pickup and R1S electric SUV, which have raised the configuration price of many booking holders by more than $ 12,000. The increase in prices comes as Rivian seeks to increase production and make its electric vehicle profitable, while adding lower levels of components that will arrive as early as 2024.
When Rivian first introduced the R1T and R1S in 2018, it announced that vehicles would start at $ 69,000 before incentives, but after Tesla announced Cybertruck with similar specifications for much cheaper, the company said it would reduce the price you are.
In 2020, Rivian confirmed that the R1T would now start at $ 67,500 for the base version of Explore, which (at the time) the company said was coming in 2022. Launch had to start at $ 75,000.
The carmaker began production and deliveries last year, but had problems increasing production.
The announced prices are expected to be achieved through volume production, but the failures are now affecting the entire price list. Rivian announced price increases today and made them sound like they were about adding options rather than raising costs by emailing customers:
Base prices of vehicles and the price of certain options, upgrades and accessories have increased. With the R1T Adventure and Explore packages, the tonneau cover can now be selected. We are in the process of updating your Rivian account page to reflect these corrections and will send you an email notification when the update is complete. Until then, all product updates and prices can be seen in our configurator.
In fact, these changes in option prices have affected many different configurations of both R1T and R1S. Rivian has introduced a new two-engine option, but the four-engine option is still the only one currently in production and has become $ 6,000 more expensive.
In addition, the carmaker made the standard battery pack unavailable with the quad motor, so that’s another $ 6,000 for people who were fine with the 260-mile range and wanted the quad motor for either performance or faster delivery time. . Now they have to upgrade to the big package.
With these changes and a few smaller options and accessories that also see price increases, many Rivian booking owners report that the price of their configurations is increasing by more than $ 12,000.
Only people who are advanced in the delivery process have fixed prices. Everyone else will have to swallow the price increase or cancel. Rivian says the price increase is the result of “inflationary pressures on the price of components and raw materials from suppliers around the world.”
Jiten Bell, Rivian’s chief growth officer, said in a comment Electrek:
Like most manufacturers, Rivian is facing inflationary pressures, rising component costs and unprecedented shortages and delays in the parts supply chain (including semiconductor chips). This increase in costs and complexity due to these challenging circumstances necessitates an increase in the prices of the R1T and R1S models we offer today – prices that were originally set in 2018. This solution will allow us to continue to offer competitive products that maintain high standards. for the quality, productivity and capabilities that our customers expect and deserve from Rivian. Along with adjusted prices for our current offerings, we are also announcing options for twin-engine AWDs and standard batteries for the R1T and R1S, which will provide customers with a wider choice as part of our expanding portfolio of options, upgrades and accessories.
With today’s announcement, Rivian is technically sticking to its originally announced base price of $ 67,500 for the R1T, but is not expected to arrive until 2024.
Taking Electrek
I doubt that these price increases are only due to inflation and the price of materials. Rivian is likely to realize that its gross margin targets will be difficult to achieve without higher prices.
It is a pity for the people who have been supporting the company for a long time. I was the holder of a first day reservation and my configuration was indicated with an “estimated price” of $ 76,500:
Rivian hasn’t updated my order page yet, but it looks like my configuration will now cost $ 89,500:
This is starting to get really expensive. And with the added price changes on the lack of a clear delivery schedule in Canada, I’m thinking of canceling my order.
I guess many other Rivian reservation holders think the same.
On the other hand, we have seen car dealers raise prices with a similar amount above the price of the sticker and even more.
I’m not sure I agree with the approach to tearing off the band-aid. Rivian had to make moves like Tesla, raise the price by a few thousand dollars every few months – and lock up owners who have already thrown in $ 1,000.
What do you think about today’s price changes? How do they affect your order, if you had one? Let us know in the comments section below.
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Kim Jong Un, founder of Nexon, South Korea’s largest gaming company, died on February 28 in Hawaii at the age of 54.
NXC, Nexon’s holding company, announced Kim’s death and said he had been treated for depression as his physical symptoms worsened, according to The Korean newspaper.
He is survived by his two teenage daughters, Kim Jung-min and Kim Jung-yun, and his wife, Yu Jung-hyun.
Nexon CEO Owen Mahoney issued a statement saying: “It is difficult to express the tragedy of the loss of our friend and mentor Jay Kim, a man who has had an immense positive impact on the world. As a founder and visionary, Jay encouraged people around him to ignore skeptics and trust their creative instincts. He will be greatly missed by his family Nexon and many friends. “
Kim launched Nexon in 1994 and became the first Korean gaming company to earn over $ 830 million in annual sales in the first year of its debut. Nexon also developed one of the first multiplayer online role-playing games, The Kingdom of the Winds, in 1996, and launched one of the world’s most famous MapleStory games in 2003.
According to SeoulNexon is now the largest gaming company in South Korea with a market capitalization of $ 27 billion.
In 2007, the 54-year-old debuted on the Forbes list of the richest in Korea, where he ranked 28th with a net worth of $ 590 million. In June 2021, Kim officially became the third richest man in South Korea with a total net worth of $ 10.9 billion, reported Forbes.
After pleading not guilty to bribery charges in 2016, when Kim was accused of borrowing money from a close friend of the prosecutor, he focused on various philanthropic activities. According to Forbes, in 2017 Kim founded the Risk Philanthropy Fund C Program, and in 2018 promised to donate $ 93 million to children’s hospitals and startups. He also said his children would not inherit his fortune.
Between 2013 and 2015, the company donated approximately $ 16.6 million to help build the Purme Foundation Nexon Children’s Rehabilitation Hospital in Seoul. Nexon claims that the hospital is the first rehabilitation hospital built for children in South Korea.
Prior to his death, Kim continued to donate to children’s hospitals in South Korea and had donated a total of $ 3.1 million to Daejeon Chung-nam Public Children’s Rehabilitation Hospital and $ 2 million to the Nexon Palliative Care Center at National University Hospital. in Seoul, which is scheduled to open sometime this year.
Image presentation via Nexon
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Houston – Exxon Mobil said on Tuesday it would end its involvement in a major oil and gas project in Russia, becoming the last Western oil company to announce its departure after Russia invaded Ukraine.
Exxon is developing three oil and gas fields near the eastern Russian island of Sakhalin in partnership with Rosneft, a state-controlled energy company, and one each from Japan and India. Exxon manages the fields and owns 30 percent of the project, which generates about 2 percent of the company’s global production.
The Texas-based company has been operating in Russia for a quarter of a century, but began shutting down after Russia invaded and annexed Crimea, part of Ukraine, in 2014, triggering Western sanctions.
BP and Shell have announced plans to sell their much larger Russian investments on Sunday and Monday. TotalEnergies of France said on Tuesday it would not invest more money in Russia, but intends to maintain its existing operations and investments in the country.
The decisions of Exxon, BP and Shell put an end to an era that began with the mass influx of Western companies into Russia at the end of the Cold War. Businesses once hope that the country, which has some of the world’s largest reserves of oil, natural gas and other raw materials, will become a promising emerging market. But President Vladimir Putin’s autocratic policies and invasion of Ukraine have turned Russia into a pariah of the international business community.
Among the major international oil companies, Equinor of Norway still produces a relatively modest 30,000 barrels of oil a day in Russia, and said Monday it also plans to leave. Several other companies have stakes in oil and gas pipelines.
“Exxon Mobil supports the people of Ukraine as they seek to defend their freedom and determine their own future,” the company said in a statement. “In response to recent events, we are beginning the process of terminating operations and developing steps to exit the Sakhalin-1 initiative.
The company said it would not make new investments in Russia, although it would not leave the country immediately.
“As an operator of Sakhalin-1, we have an obligation to ensure the safety of people, the environment and the integrity of operations,” the company said. “Our role as an operator goes beyond capital investment. The termination process will need to be carefully managed and closely coordinated with the partners to ensure that it is carried out safely. “
Rent-A-Center Inc: “It’s just a terrible quarter. The price is $ 27 [a share]. I would still sell it. I wish I could be more positive, but it was a very bad quarter. “
NIO Inc: “I do not recommend any Chinese stocks. I think the market situation is too dangerous and difficult to do.”
B Riley Financial Inc: “I’ve done a little work with them and I have to tell you it’s like any other broker. It’s just huge. And you can choose your broker, they are all huge and no one seems to want them. “
Alto Ingredients Inc: “I don’t know them. They are obviously very interesting after what we just saw with [Renewable Energy Group Inc]. I have to look at everything that has been done, using any biography. “
Stem Inc: “This is a very good company. Many people think that it just turned out to be in the commodity business … I think it’s better than that, but I fully understand, no one wants SPAC. “
Origin Materials Inc: “This is a speculative action … Renewable Energy was profitable and did a lot of great things. This is not the case with this particular action.”
Academy Sports and Outdoors Inc: “It’s not just a bad market, it’s a horrible market. I’m not going to tell you that stocks are sold at four times the profit. It doesn’t make any sense.”
Dow Jones futures rose modestly overnight, along with S&P 500 and Nasdaq futures, with President Joe Biden and Federal Reserve Chief Jerome Powell. The attempted stock market rally suffered heavy losses on Tuesday as crude oil prices skyrocketed and government bond yields fell amid signs that Russia’s invasion of Ukraine could become much bloodier for civilians in Kiev.
Major indexes hit resistance only after the rapidly falling 21-day exponential moving average, one of several potential areas of resistance to an attempted market rally. Tesla shares turned lower after briefly surpassing their 21-day high on Tuesday. Apple (AAPL) and Nvidia shares were denied near their 21-day lines. Microsoft (MSFT), which just closed above its 21-day and 200-day lines on Monday, fell on Tuesday.
Russia’s progress toward Kiev has stalled, according to U.S. military officials amid stiff Ukrainian resistance and logistical challenges. But the Russian Defense Ministry warned on Tuesday that it planned to strike Ukrainian intelligence and communications facilities in central Kiev, warning residents in the area to leave. Western officials say this is a sign that Russia’s massive strikes on Kiev’s residential areas are inevitable.
President Biden will deliver his State of the Union address to Congress and the country on Tuesday night. Biden will discuss the invasion of Ukraine, saying Russian President Vladimir Putin has underestimated the resolve of the United States and Europe. He is expected to announce that the US will ban Russian aircraft from their airspace, following the European Union, the UK and Canada.
He will also push for the revival of at least parts of the legislation to build better, proposing green energy plans as ways to reduce dependence on Russian energy. Republicans say Biden should push for more domestic production of crude oil and natural gas.
Fed Chief Powell will testify before Congress at 10 a.m. ET on Wednesday. Powell is likely to signal that the Fed’s interest rate hike will begin at the March 15-16 policy meeting, but will emphasize flexibility. Russia’s invasion of Ukraine and subsequent sanctions have pushed up crude oil prices, as well as big gains for base metals and cereals. All this threatens to further boost inflation, while exacerbating supply chain problems and slowing economic growth. Meanwhile, labour force participation may increase with Covid’s cases and restrictions rapidly decreasing, easing supply chain concerns and wage inflation.
Given all these big, uncertain cross-currents, Fed boss Powell will want to be nimble and ready to change course – and make sure financial markets know that.
Markets, whose prices were almost fully calculated when the Fed raised interest rates by half a point a few weeks ago, still expect a quarter-point increase at the March meeting. But now there is little to modest chance of a Fed change at the March meeting.
Ahead of the Fed’s next meeting, policymakers and investors will receive the February employment report on Friday and the February consumer price index on March 10.
Key gains
The Dow Jones Salesforce.com (CRM) reported better-than-expected gains late on Tuesday. CRM shares rose modestly overnight, signaling a return over the 21-day line, but fell below their rapidly falling 50-day average. Salesforce shares fell 0.8 percent to 208.89 on Tuesday.
Dollar Tree (DLTR) earnings were reported early on Wednesday, with DLTR shares flirting with buying signals over the past few weeks. The line of relative strength is now at a new peak, while Dollar Tree shares are based, a bullish signal. Investors may want to use 144.56 as an entry point, just above the highest since January 6. DLTR’s official share purchase point was 149.47.
Tesla (TSLA), Microsoft and Nvidia (NVDA) are in the IBD Leaderboard. MSFT shares are on IBD’s long-term leaders list.
The video, embedded in this article, discusses market action on Tuesday and analyzes Northern Oil and Gas (NOG), Louisiana-Pacific (LPX) and DLTR shares.
Dow Jones futures today
Dow Jones futures were up 0.45 percent against fair value. S&P 500 futures rose 0.4 percent and Nasdaq 100 futures rose 0.3 percent. CRM shares listed on the NYSE offer a boost to Dow and S&P 500 futures.
U.S. crude was trading at $106 a barrel late on Tuesday after the American Petroleum Institute reported a sharp drop in domestic crude oil supplies, with gasoline inventories also declining. The Energy Information Administration will release official U.S. oil inventories, production and demand wednesday morning.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session of the stock market.
Join IBD experts as they analyze the shares that can be taken in the stock market rally in IBD Live
Stock market rally
The stock market rally opened lower, briefly improved, but then sold out. The Dow Jones industrial average fell 1.8 percent in stock market trading on Tuesday. The S&P 500 index sank 1.55 percent. The Nasdaq composite index retreated 1.6 percent. The Russell 2000 with a small capitalization fell 2%.
The yield on 10-year government bonds fell 13 basis points to 1.71%, now erasing almost all of its gains for 2022.
Crude oil prices exploded 8 percent to $103.41 per barrel, even as the U.S. and other countries announced a significant but ultimately modest release of strategic oil reserves. An OPEC+ meeting – with Russia making most of that “plus” – takes place on Wednesday, with the group expected to continue to modestly increase production quotas, withdrawing pandemic-era cuts.
Gold futures rose 2.3 percent to a 13-month high.
Energy stocks rose as crude oil prices rose. Defense contractors continued to walk vertically, while gold, steel and mining games did relatively well. Finance and travel were big losers.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) retreated 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.7%. The iShares Expanded Tech-Software Sector ETF (IGV) retreated 0.9%, with the main components of Microsoft and CRM being shares. VanEck Vectors Semiconductor ETF (SMH) fell 3.15%. Nvidia’s shares are a major SMH holding.
SPDR S&P Metals & Mining ETF (XME) нарасна с 2,5%, а Global X US Infrastructure Development ETF (PAVE) отстъпи с 1,9%. US Global Jets ETF (JETS) падна с 5,1%. SPDR S&P Homebuilders ETF (XHB) се оттегли с 1,3%. Energy Select SPDR ETF (XLE) напредна с 1%, а Financial Select SPDR ETF (XLF) спадна с 3,7%. Фондът SPDR за избран сектор на здравеопазването (XLV) се понижи с 0,55%
Reflecting more speculative shares, ark innovation ETF (ARKK) retreated 3.1% and ark genomics ETF (ARKG) 1.7%. As elsewhere, these ETFs hit resistance near their 21-day lines. Tesla shares remain number one in ARK Invest’s ETFs.
Five best Chinese stocks to watch now
Shares hit 21-day high
Like the market rally, several megacapas are hitting resistance on their 21-day lines.
Apple shares didn’t quite get to their 21-day high, but turned around their 10-day average, falling just over 1% to 163.38. Over the 21-day line is the 50-day line. Clearing AAPL shares at this key level may offer early entry. But the official double-bottom purchase point is 176.75. Apple’s RS line for stocks is not far from the highs.
Microsoft shares fell 1.15% to 295.34, back below their 21-day and 200-day lines. A move over Tuesday’s top of 299.97 could offer an aggressive entry as a long-term leader. But the 50-day moving average and february’s peak of 315.12 are also key hurdles. MSFT’s official share purchase point was 349.77.
Nvidia shares fell 3.75% to 234.70, testing their 200-day line again after reaching their 21-day high on Monday. Rising above the 50-day line and february’s peak of 269.25 is probably necessary to offer an aggressive entrance. Reaching the peak of NVDA’s stock of 346.47 is a long way off.
Tesla shares climbed as much as 889.88 on Tuesday morning, exceeding their 21-day period before retreating 0.75 percent to 863.93. The electric car giant holds on much better than other car stocks or highly valued growth names. TSLA resumed its 200-day line on Monday after recovering from a 700-day low of 2022 last week. Rising above the february 9 high of 946.27 and the 50-day line can offer an aggressive entrance. The official point of purchase is 1208.10.
Market rally analysis
The attempted stock market rally faced resistance, with the Nasdaq and Russell 2000 interrupting a three-day winning streak.
They still hold most of their recent gains. A pause here is not so disturbing. The Dow Jones and S&P 500 have given up a little more than their recent bounces, but their attempts at a rally are intact.
The market remains headlined. As an investor, you don’t have to follow the headlines obsessively, but you need to be aware that news can have a big impact on the market and the sector.
That’s especially true now. Many of the assumptions embedded in the markets are changing. Inflation is at a 40-year high and Europe is aggressively changing decades of defence policies overnight.
Of course, this does not mean that the stock market will go in the seemingly obvious direction – the huge stock market rally in 2020 against the background of the pandemic and the collapse of the economy proves this.
A subsequent day can still happen at any time to confirm the new market rally. The confirmed upward trend is not guaranteed to work, as the recent market sell-off showed, but this is a positive signal.
Beyond the 21-day moving average, major indexes face resistance at their February highs, as well as their 50-day and 200-day moving averages, with their all-time highs well above that. So the next confirmed stock market rally will face many technical hurdles in addition to the main risks.
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Moving the market sideways – with or without FTD – would not be a terrible thing. More stocks are forming bases now. MarketSmith already has a large number of blue dot stocks – shares based or drilling with RS lines that are already at peaks. A few more weeks can generate a new crop of consolidations, while some hot stocks may offer new chances to buy or add shares.
Market time with IBD’s ETF market strategy
What to do now
The market remains in limbo. An attempted rally hit resistance, but it’s still intact. But there is no real reason for increasing exposure.
While there are reasons to maintain participation in hot groups and sectors such as energy, defence, fertilizer and steel, many of the leaders have already been extended. Given the extreme volatility, investors may want to take partial gains in some recent gains.
Keep building these watch lists. The number of shares incorporated in RS-line bases at new highs is increasing. So potential leadership is growing.
Read the Big Picture every day to stay in sync with the direction of the market and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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Russia’s invasion of Ukraine has sparked demand for cryptocurrencies in both countries, which has helped raise the price of bitcoin.
Bitcoin is trading higher against the Ukrainian hryvnia on a number of exchanges, both globally and locally, a sign of high demand. At Binance, the world’s largest stock exchange, bitcoin traded for the equivalent of $ 46,646 in bracelets. On the kuna, the largest stock exchange in Ukraine, it was $ 46,614 and traded up to $ 51,240.
Bitcoin was recently traded at $ 44,178 in US markets, up 16 percent from Monday morning, according to CoinDesk.
Binance has seen a surge in bitcoin trade in exchange for rubles since just before the Russian invasion. Between February 20 and 28, about 1,792 bitcoins swapped hands in the ruble / bitcoin pair, up from just 522 in the nine days before, according to Binance.
Western sanctions have effectively cut Russia off from the global financial network, and Ukraine has imposed tight capital controls.
Crypto is popular in Ukraine and Russia. Ukraine ranked fourth in the global adoption index created by the analytical firm Chainalysis. A report by the Russian government estimates that there are more than 12 million cryptocurrency portfolios held by Russian citizens for about 2 trillion rubles, or about $ 20 billion.
“The situation in Ukraine has exposed the value of bitcoin as an alternative money network,” said Timo Lehes, co-founder of the Swarm Markets trading platform.
The reversal of bitcoin-specific demand is a break from its recent model of trading on risky assets such as technology stocks.
The Bitcoin rally this week erased the losses for February. Most other cryptocurrencies were also higher. The ether increased by 4.7%. XRP increased by 0.7%. Avalanche rose 3.3 percent and Cardano rose 0.9 percent.
On Tuesday, the Nasdaq Composite Technology Index fell 1.2%.
Because bitcoin trades 24 hours a day, in some cases it runs risky assets, not just follows.
The Russians are queuing up to use ATMs as ordinary citizens begin to feel the impact of Western allies’ sanctions on the country following Moscow’s invasion of Ukraine. Meanwhile, the Moscow Stock Exchange remained closed on Tuesday. Photo: AP Photo / Dmitry Lovetsky
Last Wednesday, when Russian President Vladimir Putin announced his invasion of Ukraine, US stock markets were closed. Bitcoin fell about 6% overnight, then rose 13%. On Thursday, US stocks closed slightly higher after a day of hectic trading.
Bitcoin fell by almost 9% from the afternoon of Friday, February 18, to the evening of Monday, February 21, amid news of the deteriorating crisis in Ukraine. US stock markets, closed on Monday due to a holiday, did not have the opportunity to respond to the news until Tuesday. When they did, all major indices lost more than 1%.
Attention has also been drawn to cryptocurrencies for their potential as a way out for Russians trying to circumvent sanctions. While the cryptocurrencies themselves were not part of the sanctions, the White House is considering adding them.
On Twitter on Sunday morning, Mikhail Fedorov, Ukraine’s deputy prime minister, called for cryptocurrency exchanges to block Russian accounts. “It is crucial to freeze not only the addresses of Russian and Belarusian politicians, but also to sabotage ordinary consumers.
Mr Fedorov of Ukraine did not specify whether the request was personal or on behalf of the government. An attempt to contact him was unsuccessful.
SHARE YOUR THOUGHTS
What could be the effect of blocking Russians from crypto exchanges? Join the conversation below.
Crypto exchanges have largely opposed the introduction of any voluntary restrictions in Russia.
Binance said it would not make a total ban, but that it was taking action against Western sanctions. Exchange Coinbase,
Kraken and KuCoin also said they would not freeze Russian accounts without sanctions or legal requirements.
“We are trying our best to protect human rights and asset security,” said KuCoin CEO Johnny Liu. “Actions that increase tensions to infringe on the rights of innocent people should not be encouraged.”
Crypto exchanges regularly execute court orders and legal requests for data about their users, as well as regulated banks. There was no hint that the Ukrainian government, alone or in concert, would take legal steps to demand the blocking of Russian consumers.
Technically, exchanges have improved their infrastructure over the past few years and could apply these sanctions if necessary, said Jack MacDonald, CEO of PolySign, which produces software to store crypto assets for exchanges and other trustees.
Binance, led by CEO Changpen Zhao, saw a jump in bitcoin trading in exchange for rubles.
photo:
DARIN ZAMIT LUPE / Reuters
Stock exchanges have the ability to monitor accounts and transactions and even know where deposits come from. Funds from known hacks, for example, can and are blacklisted.
“It will be difficult for Russia to avoid sanctions using bitcoin,” Mr MacDonald said.
However, blocked users will still be able to find unregulated exchanges or even more non-transparent markets for buying and selling their cryptocurrencies.
Some of the Western sanctions included disrupting Russia’s Swift network, a banking consortium that processes millions of daily payment instructions.
Western sanctions and restrictions “strengthen the argument for blockchain products that will compete with the SWIFT network,” said Oanda analyst Edward Moya.
Investors are buying now, he said, in anticipation of an investment wave based on the construction of these products.
