Bitcoin and Stocks Dip on Fed and Russia Oil Sanctions Speculation

Bitcoin started falling on Tuesday from $47,000, with it continuing downwards during Shanghai morning as a bounce gave way to more red for today.

Nasdaq is one of the biggest losers at -2.52% while Europe’s Stoxx lost 2.5%. More speculative stocks like AI lost 7%, while Shanghai stands out as the only one bucking the trend with their index just about up 0.2%.

Russian stocks fell another 1.6% after diving 5% on Tuesday, while the dollar lost 4% against the rubble following a clear intervention by the Russian central bank.

Oil is down as well by 2% while natural gas keeps rising, up another 4% today with gold slightly falling.

Making it a complex picture that some try to explain by expectations Fed will move faster in reducing its balance sheet as inflation reached 7.9% in February amid robust growth at 5.5% for Q4 2022.

Data for this quarter are not yet out, but high growth and high inflation is a far better situation than very low growth with very high inflation as was seen in the 80s.

Fed thus probably has some room to move with no surprises expected as this is a bit of an old story that has been largely priced in.

That’s shown by the fact markets did not really start to move until investors realized European sanctions on Russian oil were seriously under consideration.

“These sanctions will not be our last sanctions,” the European Commission President Ursula von der Leyen said. “Now we have to look into oil and revenues Russia gets from fossil fuels.”

European Council President Charles Michel said that Russian oil and gas will be sanctioned “sooner or later.”

The European Union member states give Russia about €70 billion a year for oil. That’s not far off from half of Ukraine’s pre-war GDP.

These funds go directly to the Russian army which stands accused of committing massacres near Kyiv, and are probably being used by the Russian central bank to artificially prop up the rubble.

That same central bank is now practically in charge of oil in Russia with Gazprom metaphorically castrated as euro payments for oil now go to the central bank which manages the conversion to ruble.

That is Europe, when buying this oil, is selling euros and is buying rubles. Hence the ruble is strengthening.

Most of Europe is thus now in favor of cutting off Russian oil, except Austria, which had the Russian president Vladimir Putin at their wedding, and Hungary whose president is seen as a Putin fanboy.

Germany appears to be undecided on practical grounds, with it unclear whether this recent market action is insiders suggesting some shift, or whether it is just a speculative pricing in of a fairly new development as Europe cutting off Russian oil was not quite on the table.

Now it is and in a way that indicates it is probably just a matter of time as if these are the war crimes committed near Kyiv, you can imagine what’s been happening in Mariupol.

Sanctioning oil will probably not make any immediate difference however as it’s more about future revenue, but Russia will have less resources to use towards their military and thus may end the war more quickly.

That’s especially as Reuters has come up with a new exclusive report that Chinese state refineries are shunning new Russian oil contracts.

China probably does not want to offend Europe as they obviously can’t take on both Europe and America, a Europe in particular that currently is a bit like a hive machine in an amazing but also somewhat scary all hands on deck.

This generation has seen such sight only once from America when they were going after Manning and Assange, stopping planes even with foreign official dignitaries in them as the hive was basically in full force with the usual rules not quite applying.

So Czechia has sent tanks to Ukraine. That’s an actual immediate response because force at the end of the day can only be answered with force.

Russia put a bounty on Nato soldiers while they were in Afghanistan, so planes, drones, tanks and everything else may well be sent, though no need to microphone such things beyond showing to the public that much is being done.

A public that can’t and won’t take losing in Ukraine. So doing any business with your adversary in a situation that can in theory potentially be existential, and in practice for Europe is most serious, does not make much sense.

As such if oil, and then gas, needs to be cut off, the rhetoric has to be less about potential economic damage and more about what is being done to secure new suppliers, of which there are still many as neither oil nor gas are a fixed resource.

Because economically both Europe and America were fine during the cold war when they were doing no business with Russia, and even more than fine as wages were actually rising back then and home ownership was affordable while university was free.

Making it more a political choice. Is Europe at a stage where Russia is no longer given any more chances to change, and is instead completely cut off?

Even sanctions on oil will not fully answer that however as there would still be gas, but it would be a clear signal to Russia that Europe is most serious and is just one further move, cutting off gas, from in effect Russia being isolated completely from two of the world’s biggest markets as well as from the global business and political arena.

“Nobody can be neutral when faced with such naked aggression against civilians. This is not limited to Putin’s war.

This will also define how we globally treat such violations of international law in the future. This was our message to China at our summit last Friday,” Leyen said.