Russia’s invasion of Ukraine is putting pressure on the stock market, driving up oil costs, and causing the Federal Reserve to rethink its plans to raise interest rates. Throughout it all, Bitcoin has been on the rise, climbing almost 13 percent to $39,500 since the violence began.
It is possible that cryptocurrency is benefiting from increased demand as a currency or a store of value in countries affected by war and sanctions. The number of people purchasing bitcoin in Russia and Ukraine has increased.
The demand for stablecoins, which are cryptocurrencies that strive to keep a steady $1 value, has also increased. In addition, cryptocurrency is being used to assist Ukraine.
According to blockchain data research firm Elliptic, more than 100,000 crypto-asset donations have resulted in a total of $55 million in donations.
A Crypto’s Ride
Bitcoin prices plummeted as risk assets fell as a result of rate fears, but then soared as the Ukraine conflict escalated into a full-fledged war.
This could have long-term consequences for cryptocurrency, both positively and negatively. Ongoing global instability and economic crises may increase demand for cryptocurrencies that may be used to circumvent government regulations.
In the case of a cash transaction, “it might not be the technology you want to use to buy your morning loaf of bread, but if you need funds quickly and want to know that the funds are truly yours, then it’s a technology that can be useful,” says William Luther, an economist and fellow with the Bitcoin Policy Institute.
However, the anonymity provided by cryptography makes it a viable tool for evading sanctions. This past week, Democratic senators wrote to the Treasury Department to express concern that cryptocurrency could be used to subvert sanctions against Russia.
Over the last few weeks, the value of the ruble and the hryvnia has plummeted as a result of the war and sanctions.
As a result of this crisis, efforts to construct sovereign digital currencies, establish stablecoin laws, and coordinate efforts to track global crypto traffic may be accelerated.
Cornell economist Eswar Prasad believes that for the time being, cryptocurrency is not a “reliable and scalable workaround” for states seeking to circumvent sanctions or the global monetary system. If it becomes a greater threat, governments will almost certainly take action.