Russia-Ukraine invasion and its effects in the market, Explained
As you might know, Russia, or better said, Vladimir Putin, has decided to start a full invasion over Ukraine starting a major war in Europe where many people not related and not involved in political or power problems are dying right now meanwhile I write these lines.
The consequences of this event are just impossible to be predicted, and because its something unpredictable that no one knows what kind of effects it might have over the world, markets all around the globe have reacted in different ways:
Risk assets with higher volatility and exposed to uncertainty have fallen while assets that often mean refuge in front of uncertainty have increased their value.
Volatile assets like the assets in the Stock market usually rise in price when companies behind them are predicted and expected to have benefits in the future, and their prices fall when they are expected to do not have those benefits.
Because of this war and the economic sanctions that are expected to be made over Russia and the possible response and reaction of Russia towards Europe or the US in front of those sanctions, it is expected that the economy of every country is going to get negatively affected in general terms, and in front of negative expectations, the stock market falls affecting consequently to the companies behind of the market assets.
European stock markets have fallen already around 5% and Russian Assets have fallen in their prices down to a 40%.
Don’t get the data wrong, the fact that Russia is the most affected right now does not mean that Europe or the US are not going to be also affected and does not explain how much this situation is going to affect them.
But why this situation could affect this much to Europe and even the US? Because the effects of this war and the sanctions that might occur on it are related to one of the weaknesses of the modern world: Energy.
Brent Oil has already passed over 100USD and Natural Gas prices are already increasing more than 5% and it just started. This is having a heavier effect in Europe where most of the countries have been trying to change to Renewable energy instead of coal, in sustainable plans reinforced by Natural gas.
So as long as oil and gas prices go up energy prices everywhere and for everyone will be heavily affected.
So the money of the investors right now is being directed to Safe-haven assets, defined as those that maintain their value, appreciate, or otherwise outperform when financial markets crumble.
So against the trends in the stock markets the prices of government bonds, government debts, have been positively revalued after the Ukrainian invasion. This happens because is well known that governments can always use people’s taxes to pay back their debts, unlike private companies who are depending on trading and not taking money from citizens’ pockets.
Currencies are just another asset that also works as a refuge in difficult moments. In this situation and since all the odds are economically against them, the Russian RUB has fallen importantly, but also the Euro has been affected in price, this proves the existent fear of the repercussion over the actions Russia might have on Europe and its market, making the American dollar the safest spot on currencies right now.
Real value assets
Real assets like Gold or silver, which are totally immune to this kind due to their value being on themselves and not In third parties, situations and conditions have consequently increased their price and value and could continue rising as long the situation goes on.
So what about the crypto market? Shouldn’t be Bitcoin and the altcoins to be an alternative to Gold in moments of uncertainty in the real world?
Well, not in the current context where besides the war and the economic crisis, there are not yet confiscation risks from governments over their citizens. But if at some point the confiscation risk were higher due to the effects and side-effects of the war over countries, the chances of Bitcoin and the rest of altcoins would increase in value becoming a safe spot for people.
So right now the crypto market, as a compound of volatile assets, is being heavily affected with prices falling down, but as in the real market, those coins or tokens with stable values (Stable coins) are being held by more people and in consequence giving more benefits. Especially those assets completely decentralized.
So in the end, we can just say that war means nothing else than destruction, dead, worries, economic weakness, uncertainty, and prices inflation plus a shame for the whole of humanity.
Be safe, have your assets safe, and remembers always to invest safely being sure you make complete and exhaustive research anywhere you put your money without doubting in being demanding and exigent in your needs.