Bitcoin’s ‘Struggle’ During Russia-Ukraine Crisis Sparks Debate Over Future

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For a brief moment this month, cryptocurrency prices appeared to decouple from the volatility plaguing Wall Street – but are once again dominated by risk aversion stemming from the Russian-Ukrainian conflict.

For Bitcoin (BTC-USD), a debate has sprung up over its use cases, such as (legitimate) Ukrainian donations or (questionable at best) flows from Russians seeking to avoid sanctions.

With the token hovering between $37,000 and $45,000 over the past month, many investors have called the present moment a test for the long-term value of the asset. On Friday, Bitcoin trailed stocks lower, slipping more than 2%, and is down 6% in the past week alone.

According to Yuya Hasegawa, cryptocurrency market analyst at Bitbank, a Tokyo-based cryptocurrency exchange, a struggle is being played out between bulls and bears.

“A highly volatile asset like bitcoin has been and will be affected by stock market volatility, but a tussle between risk sentiment and inflation hedging will likely force bitcoin to move into the current to medium range. term,” Hasegawa told Yahoo Finance. .

Created in the wake of the financial crisis, Bitcoin was early promoted as an alternative payment network separate from the monetary order of governments. It has been dubbed “digital gold” by some of its most ardent supporters.

Yet since the onset of the pandemic, the asset’s performance has largely been determined by sky-high volatility and risk sensitivity, unlike a true safe haven.

It’s too early in the “adoption curve” for bitcoin to truly be considered “digital gold,” said Martha Reyes, head of research at crypto exchange Bequant.

The token has sold 32% since its bull run a year ago, but for those who bought it five years ago, its delivery yields 40 times the initial investment. Some still believe Bitcoin has a bright future as an alternative form of transactions.

“It’s immense geopolitical pressure, the fact that Bitcoin is holding up I think is long-term bullish for the asset,” said Alex Chizhik, head of listings with crypto exchange Okcoin at Yahoo Finance.

A role in a global crisis

Thanks to social media, Ukraine has received an outpouring of support via crypto donations. On Friday, the country’s government and supporting organizations received $64 million over the past 15 days according to live data tracked by blockchain analytics firm, Elliptic.

In recent interviews, Alex Bornyakov, Ukraine’s Deputy Prime Minister for Digital Transformation, said the figure was “almost $100 million”.

Complementing traditional forms of international support, crypto has proven useful as the country funds its defense, Bornyakov told Yahoo Finance this week.

As Russia stormed Ukrainian cities, cryptocurrency proved a much easier form of money for non-Ukrainian volunteers who used digital coins while traveling in and out. outside the country. It helped eligible non-military citizens flee war, according to Ukrainian-born Illia Polosukhin, co-founder of the Near Protocol crypto project.

Much of the philosophy behind cryptocurrency is aimed at preventing “governance failures” from affecting money, he explained.

“Obviously we’re not there yet, but the mission…is to create a more transparent and accountable system of governance,” Polosukhin added.

Meanwhile, there is a question whether sanctioned Russian individuals and organizations can use crypto to evade punitive sanctions imposed by Western countries.

“It’s about Russian billionaires getting their money out of Russia,” Aleksandr “Sasha” Ivanov, a Dubai-based cryptocurrency investor and founder, told Yahoo Finance.

Claiming to hold dual Russian and Ukrainian citizenship, Ivanov launched his project, Waves, in Moscow. In the past, he said his team had worked for a Russian state-owned company, but those ties were broken. Blockchain technology is not limited to money, he added.

Reuters recently reported that Russian crypto owners are trying to liquidate billions in the United Arab Emirates (UAE), which has not imposed sanctions on Russia. Still, US officials and some crypto experts have cast doubt on this idea.

According to Jason Bartlett, a cybersecurity researcher at the Center for New American Security (CNAS), the Russian elite has traditionally used places less compliant with sanctions like Dubai as a haven for its financial assets.

“Crypto is no different. This will likely require strong international political and economic pressure on Gulf states to push regional authorities to crack down on Russian oligarchs who buy up property and hide their wealth in their jurisdictions,” Bartlett added.

David Hollerith covers cryptocurrency for Yahoo Finance. follow him @dshollers.

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