Russia pulling out of the grain deal could spell disaster for world food supplies, worsening inflation. Image from freepik

NEW DELHI ( — Russia pulling out of a United Nations-brokered wartime deal that unblocked the export of grains from Ukraine would likely worsen the global food crisis and, at the same time, become a major headache for Bitcoin and other crypto’s prices.

Thousands of tons of wheat destined for delivery to Africa and the Middle East are now at risk following Russian President Vladimir Putin’s decision. Moscow blamed Ukraine for its decision after highlighting a major Ukrainian drone attack on ships in the port of Sevastopol, a Russia-annexed territory.

Ukraine called the claims a “false pretext.”

Analysts had never expected the deal to last beyond its mid-November deadline but were still surprised by the sudden termination of the deal. However, the UN, Turkey, and Ukraine decided to go ahead with the deal and agreed to send 16 ships despite Russia’s withdrawal.

Food prices could rise again following Russia's withdrawal from the Black sea corridor deal
Food prices could rise again following Russia’s withdrawal from the Black sea corridor deal. Source: Reuters

Interestingly, Moscow stopped short of imposing a blockade despite suspending its participation. Ukraine confirmed that 12 ships had set sail. The ships carried 354,000 tonnes of grains, the most in a day since the program started.

Arif Husain, chief economist at the UN World Food Programme told Financial Times that the disruption could be catastrophic for the world, especially in the current global economic slowdown.

In the good times [this] would be bad, but in the current state of the world, it’s something that needs to be resolved as soon as possible

Arif Husaid said.

How The Food Shortage Could Hurt Bitcoin And Company

Food and energy are the main drivers of inflation. Per IMF data, the average contribution from food exceeded the overall average inflation rate between 2016 and 2020.

In other words, food inflation alone has eroded global living standards at the same rate as inflation of all consumption did in the five years immediately before the pandemic

The IMF report said

Food and energy were the chief contributors to global inflation
Food and energy were the chief contributors to global inflation. Source: IMF chart of the week

Hence, rising food prices might worsen the already high inflation rates globally. As a result, central banks would continue tightening their monetary policies, driving investors away from riskier assets like Bitcoin.

With its pre-determined quantity and nature, Bitcoin acts more like a commodity in the same vein as gold and silver. On the other hand, utility tokens or stablecoins behave more like securities like bonds and stocks.

As central banks raise their interest rates, demand for speculative investment assets like Bitcoin declines. Investors tend to invest in Bitcoin when liquidity is high. However, higher interest rates sap liquidity from the market, depriving the cryptocurrency markets of their funding.

Meanwhile, Bitcoin fell below $20,500 late in the day, with traders likely selling due to fears of food shortages driving up inflation.

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