Crypto Goes to War
To combat an unprovoked invasion by one of the world’s superpowers, Ukraine has marshaled its military, volunteers, and allies. Now, it is also counting on cryptocurrency donations to support its defense.
The former Soviet satellite has taken to Twitter asking other nations and their citizens to help fund its military. Last week, Ukraine raised over $54 million in cryptocurrencies such as Bitcoin, Ether, and Polkadot, according to Elliptic. Donations in dogecoin were added to the list. As a result, donations topped $63 million. Check the Elliptic link for current figures.
Saving Lives
@dogecoin exceeded Russian ruble in value. We start to accept donations in meme coin. Now even meme can support our army and save lives from Russian invaders. $DOGE owners of the world, @elonmusk, @BillyM2k, let’s do it. Official $DOGE wallet: DS76K9uJJzQjCFvAbpPGtFerp1qkJoeLwL
— Mykhailo Fedorov (@FedorovMykhailo) March 2, 2022
The Ukrainian government has used most of the funds. However, a small sum has gone to Come Back Alive, a group founded in 2014 to provide aid to Ukrainian armed forces.
Ukraine has raised almost $273 million in war bonds. However, cryptocurrencies have been a significant means of funding the nation’s defense.
As a result, the government is expanding its use of alternative sources of funding.
NFTs Joining Fight
Ukraine scrapped a plan to reward crypto donors with an airdrop last week. An airdrop is the issuance of free tokens to supporters. This method is often used to encourage participation in a crypto project.
“After careful consideration, we decided to cancel airdrop,” Fedorov announced on Twitter last week. “ Every day there are more and more people willing to help Ukraine to fight back the aggression. Instead, we will announce NFTs to support Ukraine Armed Forces soon. We DO NOT HAVE any plans to issue any fungible tokens.”
Block Chaining Russia
Not only can Ukraine raise funds through blockchain transactions, Russia is capable of doing the same. As a result, several U. S. Senators, led by Elizabeth Warren, wrote to Treasury Secretary Janet Yellen asking if the American Government can detect and block such action.
Moving a lot of funds through the blockchain undetected would be tough, according to Caroline Malcolm of blockchain data platform Chainalysis.
“The transparency of crypto provides opportunities to identify and shut down Russian sanctions evasion,” said Malcolm.
The U. S. and allied countries have moved quickly to impose sanctions on Russia since its invasion of Ukraine. Russian banks have been blocked from using the SWIFT international payment system. In addition, the foreign assets of oligarchs and the Russian government have been frozen.
Notably, the Russian government had accumulated over $643 billion in foreign assets over several years to combat sanctions. However, those funds are now inaccessible by Russia.
The Ruble has been in freefall as a result of sanctions.
How to Stand With Ukraine
The Ukrainian government published its e-wallet accounts last month on Twitter.
Stand with the people of Ukraine. Now accepting cryptocurrency donations. Bitcoin, Ethereum and USDT.
BTC – 357a3So9CbsNfBBgFYACGvxxS6tMaDoa1P
ETH and USDT (ERC-20) – 0x165CD37b4C644C2921454429E7F9358d18A45e14
— Ukraine / Україна (@Ukraine) February 26, 2022
Russian Risk to Your Portfolio
When President Biden stopped the importation of Russian Oil this week, many people were surprised. Most Americans did not know their country had been getting 10 percent of its oil from Russia.
In addition, some investors were unaware their portfolios have ties to Russia.
Investments in Russia
Investment research firm Morningstar reports large U. S. investment firms such as Vanguard, Blackrock, and Capital Group maintained significant investments in Russian assets leading up to the invasion of Ukraine.
Forbes published the following chart listing 10 mutual funds and ETFs most exposed to Russian investments.
| Fund | Net Assets | 1-Month Return | 1-Year Return | Exposure to Russian stocks |
|---|---|---|---|---|
| iShares MSCI Russia ETF (ERUS) | $105 million (as of 2/28/2022) | −69.5% | −69% | 99.7% (as of 2/28/2022) |
| Voya Russia Fund (LETRX) | $81 million (as of 12/31/2021) | −68.8% | −70.9% | 84.1% (as of 12/31/2021) |
| VanEck Russia ETF (RSX) | $692 million (as of 2/28/2022) | −63.9% | −65.5% | 95.7% (as of 1/31/2022) |
| T. Rowe Price Emerging Europe Fund (TREMX) | $146 million (as of 1/31/2022) | −58.5% | −57.2% | 67.4% (as of 10/31/2021) |
| Morgan Stanley Next Gen Emerging Markets Fund (MFMIX) | $122 million (as of 2/28/2022) | −18.2% | −22% | 13.6% (as of 12/31/2021) |
| iShares Emerging Markets Dividend ETF (DYVE) | $775 million (as of 2/28/2022) | −13.8% | −14.5% | 9.8% (as of 2/28/2022) |
| GMO Emerging Markets Fund (GMOEX) | $2.2 billion (as of 1/31/2022) | −11.5% | −19.5% | 14.9% (as of 1/31/2022) |
| Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE) | $4.8 billion (as of 2/28/2022) | −11% | −4.5% | 12.7% (as of 12/31/2021) |
| GQG Partners Emerging Markets Equity Fund (GQGPX) | $8.8 billion (as of 12/31/2021) | −8.3% | −16.6% | 15.9% (as of 12/31/2021) |
| Invesco Emerging Markets All Cap Fund (GTDDX) | $2.4 billion (as of 1/31/2022) | −6.4% | −20.6% | 10.6% (as of 1/31/2022) |
Morningstar’s data was accumulated through Feb. 28. Some of the funds listed above may have changed their positions since that time.
Russian Stock Exchange Still Closed
The Russian stock market closed down last week and remained closed this week. The closure was a result of sanctions imposed by the U.S. and its NATO allies.
Conversely, Russia’s central bank continues the operation of its currency market. However, it prohibits the trading of foreign currencies.
Exchanges Drop Russian Stocks
The New York Stock Exchange and NASDAQ have both stopped trading Russian Companies.
In addition, Russia’s currency has plummeted. The Ruble has declined over 40 percent since the invasion. Today, the Ruble is worth less than a U.S. penny.
Inflation Racing Upward
Thursday we learned that the Consumer Price Index (CPI) rose 7.9 percent year over year through February. This is the highest inflation rate in 40 years, according to the U.S. Bureau of Labor Statistics.
You do not need the CPI to tell you prices have risen rapidly. However, the numbers tell us more than the current rate of inflation.
Higher Number Next Month
A large component of the CPI is the price of gas. The recent jump in prices at the pump is due to Russia’s invasion of Ukraine. That invasion started on Feb. 24. As a result, only four days of rising gas prices are reflected in the current CPI. We are almost halfway through March. There is no end to the invasion in sight. As a result, gas prices are likely to remain high impacting the next CPI report in April.
Look For Fed Action
“Today’s inflation report is a reminder that Americans’ budgets are being stretched by price increases and families are starting to feel the impacts of Putin’s price hike,” President Biden said Thursday. “A large contributor to inflation this month was an increase in gas and energy prices as markets reacted to Putin’s aggressive actions.”
Federal Reserve Chair Jerome Powell has been saying there will be a quarter of a percent increase in interest rates. That hike is expected to come at next Wednesday’s Fed meeting.
The Ukraine situation could force the Fed to raise rates higher and more frequently. However, Powell has ruled that out for now.
In testimony to the U.S. Senate Banking Committee, Powell said the war has not impacted the Fed’s current plans. However, the uncertainty resulting from the invasion has put the central bank on alert.
“What we know so far is that commodity prices have moved up significantly, energy prices in particular,” Powell told the committee. “That is going to work its way through our U.S. economy. In addition, we could see risk sentiment decline so you could see lower investment. You could see people hold back on spending. It is hard to see what the effect on both supply and demand will be.”
Running Simulations
Powell noted that the Fed has started running simulations to try to gauge to impact on the economy and consumers if high gas prices are sustained over several months. However, for now, he sees no need to rush rate hikes.
“It is appropriate for us to continue along the lines that we had in mind before the Ukraine invasion happened,” Powell said.
However, if inflation persists, Powell said, “then we are prepared to raise by more than that amount in a meeting or meetings.”
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Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their cat – Pudge. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.
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