Cryptoverse: Bitcoin Gets Conflict Currency Credentials

ByRichard C. Sloan

Mar 1, 2022

A Bitcoin sign is seen in a window in Toronto, May 8, 2014. REUTERS/Mark Blinch

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March 1 (Reuters) – Bitcoin has surged since Russia invaded Ukraine, backed by people in those countries looking to store and move money in an anonymous, decentralized crypto.

Trading in Russian ruble-denominated bitcoin gained momentum as the invasion began on Thursday, with daily volumes up 259% from the previous day to 1.3 billion rubles (13.1 million dollars), according to data from CryptoCompare.

In Ukraine, meanwhile, crypto exchange Kuna saw its daily trading volume more than triple to 150 million hryvnias ($5 million).

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Bea O’Carroll, managing director of Radkl, a digital asset investment firm, said war and Western sanctions have seen a trend emerge to use bitcoin to transfer value.

“Basically, having a currency that’s not controlled by the government, that’s not affected by emergency acts…it’s really interesting,” she added. “Maybe that’s how Russia gets its value. Also, on the other side, there was ‘this is how people are going to get value for Ukrainians’.”

In the five days since Russia invaded Ukraine on Feb. 24, bitcoin rose 13%, while the US S&P 500 stock index it often mimics rose about 2%. % and that traditional safety play gold is now largely stable after gaining as much as 3.5. % on the day of the invasion.

On the day of the attack, around $300 million in short bitcoin positions were liquidated, according to data from Coinglass, while Singapore-based QCP Capital said “a good chunk” of long positions effected leverage had been removed.

In addition to being largely anonymous, crypto holdings and transactions are often held in wallets on decentralized platforms accessible from anywhere.

ENTER THE OLIGARCHS

“Bitcoin could be a potential safe haven for Russian oligarchs avoiding sanctions as there will be no censorship on the Bitcoin network and on cryptocurrency transactions,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

“Cryptocurrencies could act as a powerful store of value for a large portion of assets that don’t need to be liquid.”

Still, for crypto fans, the fact that such holdings could offer a way around sanctions could be a double-edged sword.

“This could lead to regulations by NATO countries against the use of cryptography, but the flip side is that there could be wider adoption in places with geopolitical unrest,” he said. said Katie Talati, head of research at Digital Asset Manager Arca.

Ukraine also quickly spotted an opportunity in the reach and anonymity of the crypto world. Deputy Prime Minister Mykhailo Fedorov tweeted the bitcoin and ether wallet addresses, along with a plea: “Stand with the people of Ukraine. Accept cryptocurrency donations now.”

Fedorov’s government and Ukrainian non-governmental organizations raised more than $22 million in cryptocurrencies after the calls, according to blockchain analytics firm Elliptic. Read more

Although bitcoin could become a currency of choice in geopolitical risk areas, market participants warn that there are differing views on whether it can more broadly become a “safe haven” asset, a form of digital gold.

For Zach Friedman, co-founder of crypto brokerage Secure Digital Markets, post-invasion bitcoin gains serve to reinforce the “narrative around bitcoin’s store of value in turbulent times.”

STABLECOINS ON FIRE

Elsewhere: Money is flowing into “stablecoins”, which are pegged to traditional assets such as the US dollar.

As of Friday, stablecoin trades accounted for more than 83% of the crypto market’s total 24-hour trading volume according to CoinMarketCap.

USD Tether, the largest stablecoin saw its market cap soar to an all-time high of nearly $80 billion, while gold-backed cryptocurrency PAX Gold added nearly $100 million to its market cap in two days.

($1 = 98.9450 rubles; $1 = 29.7000 hryvnias)

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Reporting by Lisa Mattackal and Medha Singh in Bengaluru, Alun John in Hong Kong and Vidya Ranganathan in Singapore; Editing by Vidya Ranganathan and Pravin Char

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