What is the impact of the war on cryptocurrencies? Since the invasion of Ukraine, fighting between Russian and Ukrainian forces has escalated, and a nuclear threat has been issued by Russian President Vladimir Putin, who responded to Emmanuel Macron's speech by saying he will continue " without compromise” his offensive against the “nationalists” of Ukraine.
These significant uncertainties concerning the potential impact of this conflict and the resulting sanctions against Russia have caused the global financial markets to plummet and have also affected the prices of several agricultural and energy raw materials, such as wheat, oil, and even natural gas. The cryptocurrency market is also impacted and seems to be at the heart of the conflict between Russia and the rest of the world.
In this article, let's find out what role cryptocurrencies play in the war in Ukraine and the consequences of the conflict on the price of virtual currencies.
Ukraine wants cryptocurrency exchanges to block Russian users.
For having invaded Ukraine, Russia is targeted by numerous economic and financial sanctions, particularly from the United States and the European Union. We are referring in particular to the freezing of the assets of many political figures and Russian oligarchs; the decisions to limit the capacity of the Russian central bank to access its reserves or even the removal of Russia from the SWIFT banking network.
In order for Russia to be really impacted by the sanctions imposed by the rest of the world and not be able to circumvent these measures through an unconventional financial system, Ukrainian Prime Minister Mykhailo Fedorov asked several major cryptocurrency exchanges to freeze crypto funds in Russian accounts.
But the biggest crypto exchanges refuse.
The largest cryptocurrency exchange platforms in the world, such as Coinbase, Binance, and Kraken, have rejected this request. Some say they are ready to comply with legal requirements if they receive requests for suspension from specific users who are targeted by the sanctions.
However, many exchange leaders point out that cryptocurrencies were created so that everyone could become their own bank and no one could control the crypto assets you hold because they are completely decentralized.
This is why agreeing to freeze the crypto assets of Russians unilaterally would go against the very principle of cryptocurrencies, namely the values of freedom and financial independence.
Cryptocurrencies: weapons at the heart of the conflict between Ukraine and Russia.
But the war in the East could become a crypto conflict as cryptocurrencies are increasingly seen by Russians as a way to circumvent economic and financial sanctions imposed on Russia, as well as to escape surveillance and even guardianship by governments.
Cryptocurrencies like Bitcoin, the first cryptocurrency in the market by market capitalization, can indeed:
1) serve as a tool to prevent global powers from easily robbing users of their fiat currency savings and
2) as an alternative to combat the loss of purchasing power of their currency when central banks print unlimited money to support their economies.
1) serve as a tool to prevent global powers from easily robbing users of their fiat currency savings and
2) as an alternative to combat the loss of purchasing power of their currency when central banks print unlimited money to support their economies.
For some, the current situation clearly shows the role of cryptocurrencies – and particularly Bitcoin – as a store of value, especially in the face of the collapse of the Russian ruble (RUB) or the Ukrainian Hryvnia (UAH).
Ukraine also benefits from cryptocurrencies in this conflict, which were already heavily used by the population as a safe haven before the Russians invaded the country. The country indeed legalized cryptocurrencies just before the invasion of Russia and also accepts donations in Bitcoin, Ether, and USDT. The country would have received more than 52 million crypto donations to date!
What is the impact on cryptocurrency holders?
Bitcoin initially lost ground as geopolitical tensions escalated over the military conflict between Russia and Ukraine, to trade below $35,000. However, the price of Bitcoin then recovered strongly to the level of $43,900 at the time of writing this article, more than a 20% gain in 7 days. The main cryptocurrency's trading volumes have also exploded, particularly in Ukraine and Russia.
Bitcoin's decorrelation with falling conventional markets seems to support the idea that BTC stands out as a kind of alternative safe haven. Only time will tell if the perception of Bitcoin's role in times of crisis will change. BTC holders are hoping that the allure of the token during this war will lead to a surge in its adoption and a rise in its price towards its all-time high above $68,000.
READ: How To Invest In Cryptocurrency In 2022?
Disclaimer:
All of our information is, by nature, generic. They do not take into account your personal situation and do not in any way constitute personalized recommendations with a view to carrying out transactions and cannot be assimilated to a financial investment advisory service nor to any incentive to buy or sell instruments.
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