Tag Archives: war

Russia-Ukraine war: Day 453

Here is the situation as it stands on Monday, May 22, 2023.

Fighting

KEEP READING

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Russians celebrate reports that ‘fortress Bakhmut’ has fallen

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Why is Bakhmut important in the Russia-Ukraine war?

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Zelenskyy calls on G7 to ensure Russia is ‘last aggressor’

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Tens of thousands rally in Moldova for EU membership

  • Ukrainian President Volodymyr Zelenskyy has clarified earlier comments on the situation in Bakhmut, saying that it was “not occupied” by Russia “as of today”. Earlier, he told reporters that there was “nothing left” of the eastern city and that the Russians had “destroyed everything“.
  • Russia has claimed to have fully captured Ukraine’s Bakhmut, with President Putin congratulating his troops and the mercenary Wagner Group for taking the largely-ruined eastern city.
  • Colonel General Oleksandr Syrsky, the commander of Ukraine’s ground forces, has said Ukrainian troops were approaching a “tactical encirclement’ of Bakhmut,” according to the Kyiv Independent. The commander earlier visited the front line.
  • A Russian-installed official in Ukraine’s southern Zaporizhia region has said Kyiv struck the Russian-occupied port city of Berdyansk with UK-supplied Storm Shadow cruise missiles. Kyiv said it had hit a Russian headquarters there but did not say what weapons it used.
  • President Zelenskyy has compared the “total destruction” of the Ukrainian city of Bakhmut with the World War II devastation of Hiroshima after it was hit by a US atomic bomb.
  • The White House has said it estimated Russia’s army had suffered 100,000 casualties in the last five months — including the deaths of 20,000 Russian soldiers.

Diplomacy

  • The three-day G7 summit has wrapped up in Japan, with leaders pledging more support for Ukraine following Russia’s February 2022 full-scale invasion. Ukrainian President Volodymyr Zelenskyy took part in the summit in person.
  • The G7 meeting has resulted in “unwavering unity” in supporting Ukraine to fend off Russian war, and Zelenskyy’s presence has sent “a strong message” to the world, Japan’s Prime Minister Fumio Kishida said after the three-day summit.
  • Tens of thousands of Moldovans have rallied in the capital Chisinau to support their pro-Western government’s drive towards Europe amid what officials have said are Russian efforts to destabilise their country.
  • Canada will support Ukraine for as long and as much as necessary in its conflict with Russia, Canadian Prime Minister Justin Trudeau has said at the G7 summit.

Weaponry

  • United States President Joe Biden has confirmed a new military aid package worth $375m for Ukraine, saying the US would provide ammunition, artillery, armoured vehicles and training. The new pledge came days after Washington agreed to allow training on US-made F-16 fighter jets, laying the groundwork for their eventual transfer to Ukraine.

Is this the End of Stock and Crypto Market? Why did Terra-Luna Fall?

Stock Markets have been Crushed. And Cryptos are falling even harder. Before you get swayed by all the negative sentiments, here is an important story that you need to read.

Like several asset classes, Crypto too is an asset class. To add to this, it is a new asset class, so the volatility is inherently higher. Which is absolutely normal if you compare it with initial period of stock market.

2] Recently, Terra-Luna, which is a Crypto asset, got crushed by 97%. And, people seem to be losing faith without understanding the context of the problem. So here is a super simplified version.

3] In the ecosystem of Cryptocurrencies & Blockchain, Terra-Luna is: – An Ecosystem. That comprises of a blockchain, native token. – And, it is pegged to the TerraUSD or UST (which is an algorithmic stable-coin)

4] Just a quick explainer on Stable-coins:

  • You see Cryptos are volatile. For example, if you use one of the most trusted Cryptos (Bitcoin), it can change in value quite rapidly.
  • Using Stable-Coins (Eg. USDT, USDC, UST), they can change their Bitcoin to a Stable-Coin.
  • This is similar to you changing your “US Dollar” to a Gold ETF (if you believe that gold is more stable than USD) But, not all Stable-Coins are the same: USDT, USDC function like gold. These are non-algo driven Stable-coins.
  • To issue 1 USDT, technically the firm issuing that USDT/USDC needs to put one pegged asset as a reserve. A pegged asset could be anything: gold, bitcoin, USD etc. USDT & USDC two biggest Stablecoins are US Dollar pegged.
  • Another category of stablecoins are called Algorithmic stablecoins. In simple words, they don’t depend on manual actions of buying an underlying peg. But, are rather driven by a smart contract (a computer code– to buy/sell the peg).

4] So back to Terra-Luna: – The Terra-Luna ecosystem is pegged to UST (which is an algorithmic stable coins). – A point to be noted that Algorithmic stable projects have not usually succeeded in the past (eg. Titan and Iron Finance).

Why is Terra – Luna Falling ?

5] The way Terra-Luna ecosystem works is this:

a. In the Terra-Luna ecosystem the goal is to maintain a peg between Luna and UST (1:1 peg).

b. The smart contract essentially tracks supply and demand of UST and LUNA.

c. If price of UST > 1$, people can sell Luna to the Blockchain (Terra). This is then converted to UST. Since the supply rises, the prices falls.

d. If UST decreases in price, UST holders are offered to convert their UST into LUNA coins. And the prices go up.

e. But if a situation arises where no one wants to exchange Luna or UST, then it becomes a problem. f. This can happen for a wide range of reasons [eg. sudden price fall of UST or Luna; arbitrage opportunities etc].

On 9th May, UST fell to $0.68. This was triggered due to market sell off in Cryptos. At this stage, the investors neither wanted Luna or UST. The peg arbitrage further worsened the problem.

6] Now the folks managing Terra-Luna is trying to build back up the investor confidence by re-pegging it to alternate assets (Eg. Bitcoin), but seem to be losing the race.

7] The major problem now is that the winning advantage for Terra-Luna was that it was winning in the algo driven Stablecoin ecosystem. But, given the fact this model has somewhat failed (and given previous failures of algo stablecoins, the investors are going to be skeptical.

8] Does this mean that the entire Crypto ecosystem has failed? The answer is no. The likely outcome is that: Stablecoins now are likely to be more regulated. And, this is not bad.

9] In short if you are an investor, you should do your due-diligence before investing. The rules remain simple: a. Invest, if you truly see fundamental value on a project. b. And, be diversified within and across asset classes.

Governments Don’t want you to know this ?

1] I wish people knew this about politics and economics. Economies grow because our wants > resources. Therefore, companies try to produce things efficiently.
And, we consume them because we derive benefits.

2] If most of the things in the world were left as “free markets”, money would automatically flow to most efficient producers. In 2022, governments & citizens alike are bleeding through their nose, paying high taxes, laden with crazy debt and high inflation.

3] Why? it is a validation of the Keynesian economics going wrong. So here is the back story:- Back in the 19th century, Gold was a currency. FIAT money came and improved the speed of transaction and the fractionalisation problem associated with gold.

4] The system worked up until WW-1. Now, War is costly and if we citizens truly understood the true cost of war, no one would go to one.

5] But, this presented an amazing opportunity to devious governments to de-facto institute a system: where FIAT money (or government bonds) would be presented as a great investment opportunity to the general masses. Bonds were swapped for gold, with a promise of returns.

6] The model got tweaked and FIAT (which has infinite supply) replaced gold (which has a finite & a stable supply) at scale eventually.

7] Masses were convinced that 2% inflation is great for you (since it allows the world to grow– but de-facto it simply gives governments more power to print money).

8] The more the government can print, the more useless business it can subsidise (eg. consider Airlines, Power Plants etc in India) all are now being privatised, after ginormous failures. And, after destroying crazy amount of wealth.

9] You would ask: who gave governments so much money to destroy? Simple answer: You and me. Did we give it willingly? the answer is no. We basically gave them a licence to print as much money as they like (we pay it back through increased taxes and inflation).

10] Meanwhile, short sighted politicians go on 4-5 year spending extravaganzas dolling out political favours to people/businesses they like, offering cheap debt. Why? Because they have infinite power to print.

11] The fact remains you can earn 10 Million and put it in your bank account. You will feel safe.But, even that can be burned down to 0 through hyperinflation. Why no one talks about it? because most of the Economics that is taught in schools/universities is Keynesian