Holy buckets! I’m trying to wrap my head around this as it is unfolding in real time but it appears Russia is going to recognize Bitcoin and other cryptos as currency.
Bitcoin adoption started on the fringes as only computer nerds and criminals used it. It is now a lot more mainstream and all different types of people are adopting it. We are now seeing the same type of adoption on a country level. It is the fringe countries like El Salvador and the criminal countries like Russia that are adopting it first. Eventually all countries will begin to adopt Bitcoin. These are obvious signs of an increase in demand for Bitcoin, as we know that supply is fixed, so eventually the price gets pushed up. This is why we HODL and save in Bitcoin - because it increases our purchasing power over time.
A couple interesting things come to light when thinking about Russia and Bitcoin.
All oil is sold in dollars, and Russia sells a lot of oil - do they sell it for Bitcoin?
The US has threatened to sanction Russia. Which means, cutting them off from the global financial system AKA weaponizing the dollar. Bitcoin fixes this.
Does Russia add Bitcoin as a strategic financial reserve asset?
Russia has an abundant amount of energy
The oil is what peaks my interest the most. All oil is sold in dollars and anyone who has attempted to do otherwise is now dead. They say our dollar is actually backed by oil and it is referred to as the petrodollar system. Alex Gladstein has an amazing write up on this and it can be found here. I highly suggest everyone reads his article. Personally, I think the day that Russia sells oil for Bitcoin marks the end of the dollars status as world reserve currency.
The next point is that the US has threatened to sanction Russia if it doesn’t do what we want. I don’t want this newsletter to get political so I’m not going to dive into whether this is good or bad but the fact is that Bitcoin fixes this. You can’t stop it or sanction it so if the US sanctions Russia that would be the BIGGEST display of need for Bitcoin on a geopolitical level. Putting it blatantly - using Bitcoin allows anyone to tell the US to fuck off.
Next, does Russia start stacking Bitcoin onto its treasury? Right along side their massive gold reserves. Do they say anything about it if they are or do they quietly do this? Certainly saying something like that would push the price up so they could get cheaper Bitcoin if they don’t say anything. Why do countries have gold? Because it was hard money that held its value, Bitcoin is harder money that holds and even grows it’s value. Makes plenty of sense to me. Historically, whoever had the gold, had the power and in a digital future, whoever holds the Bitcoin, has the power. The adoption of Bitcoin at this level follows a game theoretic path and a fellow Bitcoiner, Anthony Pompliano puts it quite nicely.
If Russia becomes sympathetic to the bitcoin and crypto industry, including putting the digital currency on their balance sheet or mining with state resources, it will force the hand of the United States. There is a global competition underway that has a decentralized, open system at the heart of it. Anyone can plug into the system. The game theory is that no one wants to start the cascade, but once your adversary does it, you are forced to adopt the technology or risk being left behind.
Lastly, the energy! Russia is an energy rich nation and this gives it very strategic advantages to mining Bitcoin. Putin even says so himself, look below. Russia would be able to to mine Bitcoin on a very large scale using their wasted or stranded energy. Currently Russia sells a ton of natural gas to Europe - is it more profitable to just use that gas to mine Bitcoin instead? Lots of chess pieces are going to start moving as Bitcoin adoption grows.
Conclusion
Russia is simply playing into the incentives by adopting Bitcoin. The flip side of that coin is that as Russia adopts it so do their citizens. As Bitcoin continues to grow in price everyone is happy, the government and people alike. What is happening in the background is that as Bitcoin grows, people start to prefer it over the Russian ruble. People start getting paid in Bitcoin, start selling things for Bitcoin, start saving in Bitcoin. As we recall, Bitcoin isn’t controlled by any government so the power starts to shift away from the government to the people. As people have a currency that incentives savings, there is less spending. Less spending means less tax collection, slowly but surely defunding the state. In turn, that state will have to print to make up the difference, which devalues the currency even more, and even further incentives people to hold and use Bitcoin. Communism/marxism doesn’t hold up under these conditions, neither does socialism, and I’m not so sure democracy even. Bitcoin acts like a trojan horse to the nation state.