Bitcoins surged as much as 16 percent on Tuesday. As the Russian offensive against Ukraine continues and the United States tightens sanctions.
According to Coin Metrics, the price of the cryptocurrency last increased by 6 percent the previous day to $44,219.50. Following Russia’s invasion of Ukraine. Risk assets like stocks dropped precipitously. Sending cryptocurrency prices tumbling last week.
To $2,980.38, ether increased 5.4 percent. The cryptocurrency asset earlier in the day surpassed $3,000.
According to some analysts, the significant increase was caused by investors buying the dip. Russians attempting to utilize cryptocurrency to escape sanctions. And Ukrainian and Russian citizens looking to emigrate.
Nowadays, cryptocurrency is a more widely accepted component of the world’s financial system. Which eventually makes it a part of international conflict as well, for better or worse. Russian soldiers’ invasion of Ukraine puts this on full display. Some Ukrainians are also using cryptocurrencies as a substitute for the country’s financial institutions. Which are restricting access to bank accounts and foreign currency. In a situation where governments are in disarray, it is challenging to rely on conventional banks. And there is concern over surveillance. So it makes sense that a system that is largely anonymous and ungoverned would be alluring.
Using stable coins as a haven
Transactions on centralized bitcoins exchange in both the Russian ruble. And the Ukrainian hryvnia has increased to their greatest levels in months since Thursday when the Russian invasion started.
According to Clara Medalie, research director at cryptocurrency data provider Kaiko. The volume of the stablecoin Tether in rubles is more than twice as high as the volume of bitcoins. Indicating that stablecoins may be more useful as safe-haven assets or for evading sanctions.
The majority of dollar-pegged stablecoins. Like Tether or USDC, are created by centralized businesses that might be subject to penalties. Forcing them to keep an eye on transactions, she said.
Wars and cryptocurrency
Both sides of the war sparked by Russia’s invasion of Ukraine are utilizing cryptocurrencies. Their capacity to traverse borders defying laws and regulations is assisting Ukrainian refugees in removing money from the nation. But it could also offer a mechanism for Russian elites to evade harsh economic penalties.
Immediately following the invasion last month, the Ukrainian government. Which was in dire need of supplies. Tweeted a request for donations in bitcoin and ether. Ukraine’s Ethereum wallet has received £3.2 million as of the 4th of March. While its bitcoin wallet had collected more than £7.5 million.
Ukraine was in a good position to do this before the start of the war. Although it refrained from designating any cryptocurrency as legal tender like El Salvador has done. Its parliament did legalize cryptocurrencies last month.
Dmytro, a Lviv-based computer programmer who works for a cryptocurrency mining business and requested that his last name not be used for security concerns, told New Scientist that he had used bitcoins to get away from the conflict in Ukraine.
Ukrainians use cryptocurrency, but there are restrictions
At least some Ukrainians who are currently fleeing the nation appear to be bringing their cryptocurrency with them. With the intention of exchanging it back into fiat money once they reach safety. Others appear to be considering cryptocurrency as a means of wealth storage as Ukraine’s economy implodes. The nation’s central bank banned electronic cash transfers at the beginning of the invasion. And is currently preventing Ukrainian citizens from withdrawing foreign currency for a variety of transactions. The trade volume on the Ukrainian cryptocurrency platform Kuna increased to its highest level since May 2021 during the last week of February.
Why Bitcoin is Booming?
More than most cryptocurrencies, Bitcoins were viewed as a type of “digital gold” that would provide stability as the world became more chaotic and unpredictable by many of its libertarian-leaning supporters.
Inflation in the US is rising at its quickest rate in decades, and the so-called “fear index” used by Wall Street to gauge projected stock market volatility, the VIX, has increased by more than 80% this year. Last month, the Canadian government threatened to seize the bank accounts of anti-vaccine truckers in response to the threat of a protest convoy, prompting requests for a form of currency that isn’t subject to government seizures. In addition, a large number of American businesses have left Russia, making it nearly impossible for its citizens to access their bank accounts, use credit cards, or even post on social media.
How the crisis in Russia and Ukraine will affect the Common People?
Given the expansion of the Russia-Ukraine conflict into a situation resembling a war, markets are expected to continue under pressure. Any response from NATO or US forces will simply make the situation worse. Investors must maintain their composure to get through the current scenario, according to Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd.
The scenario has produced uncertainty, which has made the markets uneasy as money from around the world flees in search of safe-havens. Retail investors suffer when markets decline, but the war may also have additional effects on the average person.
Food price increases
Previous supply-demand models for the global food system were mostly based on weather and other supply-related phenomena. But today, we find ourselves in an unthinkable situation: a conflict of this magnitude in Europe, in such a vital food supply hub as the Black Sea, especially when it comes to wheat and fertilizers. The likelihood of societal unrest in poorer nations may considerably increase if food and fuel prices rise.
The length of the conflict and the extent of the destruction and disruption it produces will, of course, determine the extent of the damage to the world economy.
Analysts disagree that sanctions will stop Russian President Vladimir Putin from pursuing his goals in Ukraine.