Will crypto be the means of transaction after sanctions?

Everybody knows there’s a war going on in Ukraine, Russia is trying to take over the country and they’re slowly succeeding with the mission. What’s interesting is how the rest of the world responds to this behavior from Russia, everyone agrees that this is a violation of human rights and the west shouldn’t tolerate this type of behavior from a superpower.

Oil is always the reason

The economics behind this invasion is very complicated, but it’s mostly connected to oil. Today oil prices are at an all-time high, mostly because large parts of Europe decided to connect their energy supply to the Russian pipelines called Nord Stream but also because society as a whole is trying to use less oil which causes companies to withdraw supply in order to keep the price up, that’s why USA has continuously asked OPEC to increase their output. The United States has a very strategic position regarding its access to oil, because the world has decided to measure oil in the US dollar, America has a way to access endless amounts of oil for free. They control the way oil is measured, therefore this gives America a comparative advantage in their energy supplies.

This hasn’t been an issue for a long time, but this war is showing the world why we can’t rely on the dollar to measure oil. Russia owns about 10 % of the world’s total oil supply which makes them one of the market movers in the commodities market before the war oil was already a large problem for society because its volatile price is becoming unstable and it’s affecting markets around the world. With the sanctions coming, we can expect another rise in the price. At least, 10% because that’s the equivalent that has been cut out from the world. These insane oil prices all derive from the fact that we choose to measure oil in one single currency. Because the prices keep going past the consumer equilibrium, soon we’re gonna see a big change in how we trade energy.

The way cryptocurrency can help

For starters, cryptocurrency is just like any other form of currency; belief-based. Its intrinsic value usually derives from what other people believe like Bitcoin. The difference with crypto is the ability to manipulate. This means that raising prices, high inflation, and devaluation might not be a problem if we adopt crypto. This is just a theory, however, the possibility of having some sort of currency that we can attach to a certain price isn’t totally crazy. Cryptocurrency offers a lot of flexibility while normal currency usually follows supply/demand principles that can be manipulated by many factors. If you want to learn more about crypto read this article.

The benefit of cryptocurrency is the ability to decide stuff and make sure it can’t be changed, this is actually very beneficial because this makes corruption very hard. The supply of Bitcoins can’t be changed by another person, it’s pegged at a fixed rate. This has both pros and cons, if you lose Bitcoins it’s very hard to recover them. However, this also leaves out the option to inflate the currency for personal gain. Central banks prints as much money as they want to, even tho those in charge are public servants no one can know for sure if the decisions being made are for the taxpayers or for their own personal gain. According to statista.com, the amount spent on lobbying in 2021 reached an all-time high of 3.71 billion dollars in the United States. This shows that corporate engagement has increased from the private sector, which also ends up influencing the government for its own personal gain. By having a system like Bitcoin, it would be impossible to do this type of transaction without transparency.

Where’s the equilibrium for commodities?

Prices of commodities affect our lives in various ways, especially oil. Demand for oil will most likely stay high because the world is developing into a technocratic society the demand for energy will increase. The more we use technology, the more we need oil. One possible way to lower the price equilibrium for oil is by establishing more nuclear power plants, nuclear power plants can supply energy for a very long time due to the half-life it’s possible to reuse the same nuclear source. However, because there’s a very divided opinion with regards to nuclear power’s safety it’s become a political question rather than a solution for an affordability problem. Wind energy is also an option, however, due to its low efficacy compared to nuclear power it’s impossible to lower the oil equilibrium with turbines.

Prices of commodities will most likely keep going up due to restrictions however, this can also be a great opportunity for you to make some money. By using a good broker you can keep up with price actions before they happen if the broker offers you great tools for it. Here’s a list of a few brokers that offers great tools to trade commodities;

eToro (review) – This platform has made itself known for its copy trading and their “community-style” trading, what I like about eToro is the transparency you can use to make more money on your trades. You can very easily follow successful traders who already earn high returns and execute the same trades. If you want to register for eToro, click here.

Skilling (review) – Skilling is one of the most reliable brokers on the market right now, it’s a Cyprus-based company with a background of Swedish entrepreneurs. The platform is also very user-friendly, regardless of whether you’re an intermediate or a beginner this platform will really make trading easier for you. Click here to start trading here!

 

AvaTrade (review) – AvaTrade is a well-known broker based in Cyprus, it’s been around since 2006 and has over 1 million active traders in over 180 countries worldwide. Their website is very user-friendly and offers a large variety of asset classes you can trade! Click here if you want to check them out!

Published: Wed, 09 Mar 2022 20:05
Author: Robin Babaiy

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