Myth of Money: Russia, GBP, Iran and the Threat of WW3
Welcome to this week’s edition of Myth of Money, a weekly newsletter on the digital asset markets read by 12,000+ investors.
Disclaimer: The following is not intended as investment advice. Do your research.
This is a somewhat terrifying week in geopolitics. And all signs point to our Western leaders not thinking through the battles they have picked.
The following is a rundown of some of the most alarming stories, which I do not share to simply be alarmist. The is a growing probability of both a global conflict and a global economic crisis. Depending on where you live, this is a good time to take stock of your financial reserves and make a plan for the next 6 to 12 months.
Putin Announces Military Mobilization and Threatens Use of Nuclear Weapons
Russia announced a draft of 300,000 reserve soldiers this week with an immediate military mobilization. Airports were filled with men exiting the country to Serbia, Turkey, Dubai, or really anywhere one could afford a flight. More than 8,500 Russians traveled into neighboring Finland on Saturday by land.
Russians, including mothers, took to the streets to protest against Putin’s actions. At least 1,472 protesters have been detained in dozens of cities across Russia as of Saturday.
Russia has moved to dissuade military men from dodging the draft or disobeying orders with new laws. Under the new rules, Russians who abandon or fail to report for military duty could be imprisoned for up to 10 years.
Meanwhile, Putin pushed for referendums in the Eastern towns in Ukraine, paving the way for the Russian annexation of the region, and allowing Moscow to frame the ongoing Ukrainian counteroffensive as an attack on Russia itself.
This provides a convenient “sovereignty” argument to Russia, where Putin can claim that the U.S., by continuing to send weapons to Ukraine, is attacking Russia itself, and therefore Russia can justify the use of “tactical weapons”. Putin went on television earlier this week reminding the West that Russia’s stockpile is both larger and more modern.
Europe is Facing Fuel Shortages As Russia Cuts off Natural Gas
Meanwhile, Europe is struggling to cope with fuel shortages as Russia cuts off gas to Germany and other countries due to a “failed turbine.”
Europe is facing an energy crisis that is squeezing ordinary people’s finances and in just a few weeks could mushroom into rolling blackouts and factory shutdowns. Already, many economists say a recession is on the way.
The cause: Russia has choked off the supplies of cheap natural gas that the continent depended on for years to run factories, generate electricity and heat homes. That has pushed European governments into a desperate scramble for new supplies and for ways to blunt the impact as economic growth slows and household utility bills rise.
On leaders’ plate right now: how to cushion the blow to the poor, who are hit the hardest by higher electricity, gas and food bills, and how to calm electricity and gas markets that have gone haywire, with fluctuating price increases of more than tenfold. (Source: AP NEWS)
European leaders are becoming increasingly worried about political unrest.
Rising Fuel Costs Are Leading To Rampant Inflation
People’s savings are being inflated away. GBP hit a new low of $1.05 against the USD today.
Sterling slumped to a record low on Monday, prompting speculation of emergency response from the Bank of England, as confidence evaporated in Britain's plan to borrow its way out of trouble, with spooked investors piling into U.S. dollars.
S&P 500 futures fell 0.8% and European futures fell 0.7%. Two-year Treasury yields broke above 4.3% to a new 15-year high. The euro hit a 20-year low.
The pound plunged nearly 5% at one point to break beneath 1985 lows and hit $1.0327. Moves were exacerbated by thinner liquidity in the Asia session, but even after stumbling back to $1.05, the currency is still down some 7% in just two sessions. Options pricing implies a wild ride ahead. (Source: Reuters).
At the time of writing, the CME halted GBP options trading as currency continues to collapse.
Meanwhile, the rest of Europe continues to struggle as the Euro inflates due to rising food and energy prices.
Eurozone inflation hit another record high of 9.1% in August, EU statistics office Eurostat confirmed on Friday, driven by sharply higher energy and food prices, and was likely headed towards double figures.
Consumer price inflation in the 19 countries using the euro rose 0.6% month-on-month and by 9.1% year-on-year, the highest rate since the euro was created in 1999.
There is growing concern that if the Russia-Ukraine conflict isn’t settled by the winter, many families in Europe will not be able to heat their homes in the winter, sparking a revolution.
Lebanon Shuts Down Banks Until Further Notice
Things are only getting worse in Lebanon, as the country’s banks have been shut down until further notice due to a series of armed ‘hold-ups.’ The Lebanese Lira has lost 90% of its value since 2019.
Protest Break Out in Iran
According to CNN:
Since Friday, demonstrations have taken place in at least 40 cities nationwide, including the capital Tehran, with protesters demanding an end to violence and discrimination against women as well as an end to compulsory wearing of the hijab.
Amnesty International previously said that 30 people had died. CNN cannot independently verify the death toll -- a precise figure is impossible for anyone outside the Iranian government to confirm -- and different estimates have been given by opposition groups, international rights organizations and local journalists.
At least 1,200 people have been arrested in connection with the wave of protests, Iranian state-backed news agency Tasmin reported Saturday…
At least 17 journalists have been arrested in Iran as anti-state protests spread across the country…
Iranian authorities say they will restrict internet access in the country until calm is restored to the streets.
Things seem to only be getting worse globally as our simulation seems to be breaking. Winter is coming.
This Week By the Numbers 📈
Top Stories 🗞️
Coinbase is being sued by Veritaseum Capital LLC for patent infringement over its crypto transfer technology, according to Reuters. The lawsuit says that several Coinbase services infringe previous blockchain patents. Hence, Veritaseum is seeking $350 million. Veritaseum’s digital token offering led to a settlement with U.S. securities regulators in 2019. Its coin is the VERI token. The lawsuit was filed in Delaware federal court. It claims that Coinbase infringed a patent awarded to Veritaseum founder Reggie Middleton by the U.S. Patent and Trademark Office last December, Reuters reports.
The Ghanaian Cedi (GHS) has dropped to less than 10 Cedis for a dollar as investors anticipate some respite for the beleaguered economy. At the time of writing, it takes 10.1 Cedi to buy a dollar, which follows a continuous decline over the last 12 months. During that period, the Cedi has contracted by 40% against the dollar. However, according to a Bloomberg report, investors continue to await a financing deal between Ghana and the International Monetary Fund (IMF) which could provide some support to the world’s worst-performing currency in 2022 after the Sri Lankan Rupee. In July 2022, the IMF staff met with senior government officials concerning the economic issues and said they would continue to discuss the ‘formulation of their Enhanced Domestic Program that could be supported by an IMF arrangement and with broad stakeholders.’
Digital asset data analytics company Inca Digital will study the implications of digital assets for national security under a year-long contract with the Defense Advanced Research Projects Agency (DARPA) announced on Friday. DARPA is the R&D branch of the United States Department of Defense. Inca Digital will work on a project called "Mapping the Impact of Digital Financial Assets," which will aim to create a “cryptocurrency ecosystem mapping tool” to provide information to the U.S. government and commercial businesses. Besides looking at possible money laundering and sanctions evasions, the project will contribute to understanding interactions between traditional and digital financial systems, money flows into and out of blockchain systems and other uses of cryptocurrency in areas of concern to the U.S. government.
The United States Securities Exchange Commission (SEC) has made an unprecedented claim that Ethereum transactions take place in the United States because Ethereum nodes are “clustered more densely” in the U.S. than in any other country. The SEC argument is found within a Sept. 19 lawsuit against crypto researcher and YouTuber Ian Balina, which alleged, among many other complaints, that Balina conducted an unregistered offering of Sparkster (SPRK) tokens when he formed an investing pool on Telegram in 2018. The SEC claims that at the time that U.S.-based investors participated in Balina’s investing pool, the Ether (ETH) contributions were validated by a network of nodes on the Ethereum blockchain, “which are clustered more densely in the United States than in any other country.”
MicroStrategy (MSTR) bought 301 bitcoins (BTC) between Aug. 2 and Sept. 19 for about $6 million, according to a filing with the U.S. Securities and Exchange Commission on Tuesday. The software company that was co-founded by entrepreneur and crypto advocate Michael Saylor bought the world's largest cryptocurrency at an average price of $19,851 per coin, the filing said. MicroStrategy is a well-known bitcoin holder, putting the cryptocurrency in its reserves. It now has almost 130,000 bitcoins, acquiring them for a total price of $3.98 billion, or $30,639 per coin.
Product of the Week: Ape Water 🦍 🍌
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Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics, and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital, and Cryptocurrencies. I believe in empowerment closing the financial education gap and creating equal opportunity for the next generation. I have invested in 20+ companies and funds. Check out my portfolio here.
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