The Russian Rubble (RUB) has plunged, down 20% this year with 10% of it just today after Saudi Arabia began pumping oil production.
Saudi oil minister Prince Abdulaziz bin Salman Al-Saud (pictured above) tried to get Russia to agree to a plan to reduce oil production by a million barrels in light of significant fall in demand.
Putin basically said njet, and the Crown Prince basically said ‘crash it,’ offering a $6 to $8 discount to western markets, so sending oil to $30 or so.
Russian media is claiming they can tolerate RUB down to even 70, so 50% minus from here.
They also claim Russia has more foreign exchange reserves than Saudis, and they don’t mention it but Russia has been piling on gold since 2018, amassing huge reserves.
Russia and Saudis were also competing over the Indian market, with the wider picture of course having the Saudi-US proxy and Iran-Russia proxy while Israel gives and receives gifts to and from both Trump and Putin.
This man has been outplayed geopolitically in every endeavor he has undertaken to the point plenty might blame him for this Chinese corona nonsense because obviously natural speculation would be this is China’s response to his shambolic handling of the trade war to the point he threatened to tariff Scottish Whisky!
This oil tax cut moreover is a stimulus of sorts as it should cushion stocks a bit, rather than crash them, but fundamentals are probably not playing too much of a role in the market right now more than speculation.
Anyway, what’s any of this gotta do with bitcorn? Well, we suspect a fairly significant chunk of bitcoin movements is due to it being used in international commerce.
$8 billion does not move just for speculation, although maybe, we don’t have rigorous academic analysis yet and bitcoin has this weird ‘change’ system where moving say 1 bitcoin in an account with 1,000 bitcoin might show as a 1,000 movement.
But even if we estimate it properly, it at time gets to $3 billion or even $4 billion a day and usually it is at $1-$2 billion a day.
That’s a lot, although not when compared to fiat movements, but a reasonable chunk of bitcoin’s price might be due to demand for international trade especially between countries or regions that are not integrated very well in the international banking system or where they have capital controls.
An easy example might be Brazil to China or vice versa for a shipping. Going through the banking system would probably be quite costly and time consuming in addition to in China potentially needing capital control paperworks. So you just offer a discount in bitcoin and you get the money pretty much instantly.
Another one might be Russia-Iran, or Iran whoever. They can’t quite go through the banking system especially if those banks want to engage in international business, so they might bitcoin or even eth or whatever other crypto.
If international trade is reduced then – presuming some part of that trade is done in bitcoin – you’d expect its price to fall.
If the Russian Rubble falls on the other hand, how it might affect bitcoin depends on how much demand there is in Russia for BTC.
One easy way of proxy estimating that demand is peer to peer volumes on Localbitcoins which for more recent times needs to account for falling volume due to artificial factors like KYC implementations etc.
So if we focus more on the ‘normal’ times before this change and while not bubbly territory, Russians were exchanging some 4,000 bitcoins a week, worth $30 million, with these being unfakable volumes and a fairly inconvenient way of buying and selling bitcoin compared to proper exchanges.
So its a proxy estimate, and a useful one when compared to say US where ‘normal’ activity was about 1,000 bitcoins a week.
Even in hyperinflated Venezuela the top was about 2,000 bitcoins, usually more maybe 1,000 or 500.
So comparative analysis of this particular data suggests there is significant demand for bitcoin in Russia.
Thus if the value of the Rubble falls, Russians are able to buy less bitcoin, meaning there is less demand, and so its global price might be affected.
On the other hand you’d expect Russians to go to harder assets if the value of national money is falling, but perhaps only when it is isolated, when it is only Russia say.
When it is a more global fall in trade, and thus in demand, it appears there is no safe haven asset where that term is used in the context of suggesting it should rise in price.
So the answer to our title question is no, not this specific Saudi-Russia oil war, but that ‘war’ is more a symptom of the disturbance the Chinese virus has unleashed.
A disturbance that is affecting trade and since a key component of money is a means of exchange, it is also affecting non-bank money.
For now. In the largely still speculative stage when people are stacking up pasta and so increasing the velocity of money and thus inflation for foodstuff while deflating less edible stuff.
That temporary spur naturally will then get back to the more normal means of exchange when hard assets start again reflecting the quality of being a safe store of value which can’t just be taken from your bank account.