The Russia-China Alliance
Why it might be bad for crypto.
Presidents Putin and Xi sharing a toast in Moscow this week.
Driving Russia Into China’s Arms
In hindsight, launching a hybrid war against Russia over who controls the Donbas may not have been the best idea. A consequence of it has been the diminishment of America's status as world's sole superpower. We still are that, and the dollar is still the world's reserve currency, but you can already feel the ground starting to shift. China is now brokering peace deals in the Mideast, and winning commitments to use its yuan as the currency for settling more foreign trade.
As a polemicist, Tucker Carlson overstates the case slightly in the clip in the tweet below, but he's right about the direction in which this is heading: the eventual end of dollar supremacy and of U.S. hegemony.
The good news is that multipolarity could benefit the U.S., if we accepted its inevitability, and planned accordingly.
Neither Putin nor Xi have the aspirations or ability to pursue world domination. Eastern Ukraine is historically and strategically important to Russia, as is Taiwan to China, but beyond that, both countries seem happy to engage in mutually profitable trade, with each other and the rest of the world. Neither is trying to impose an economic system or specific form of government globally, as the Soviet Union was during the Cold War. Capitalism won, including in China (despite its ruling party still calling itself communist).
We could agree that their borders are their business, negotiate arms control deals with each other, and focus our energies on improving our own country instead of fueling conflicts elsewhere.
The bad news is Western hawks insist on provoking Russia and China in their respective front yards, in ways we'd never tolerate them doing in North America.
Why This Could Be Bad For Crypto
Think of things from the perspective of the U.S. government, and the Federal Reserve. After levying nuclear-level sanctions on Russia a year ago, we've just had three significant bank failures, while CEO of Russia's largest bank just recommended paying out a record dividend to his shareholders (full disclosure: I am one of them, although my shares are frozen to to U.S. and Russian sanctions):
"I note that over the last five months, Sberbank's shares have gained over 70%," [CEO German] Gref said. "Those investors who believed in us in the most difficult period, from spring to autumn 2022, will receive the highest possible return on their investments."
At the same time, the settlement of international trade between Russia, China, and their trading partners is starting to shift toward the yuan, and U.S. inflation still isn't under control.
And on top of all that, crypto bros, led by Balaji Srinivasan, are sowing panic over America's banking crisis,
And publicly betting on hyperinflation.
In light of all that, I think the bitcoin bros may be tempting fate by spreading FUD about the dollar. The U.S. may not be able to bully Russia or China, but its regulators and the Fed can still take some air out of crypto.
With that in mind, one of our next trade alerts here will likely be bearish bet on a stock in the crypto sector.