Russia’s invasion of Ukraine has put bitcoin and other cryptocurrencies centerstage as people look for ways to donate funds.
There was a time when cryptocurrency was often associated with the dark side of human nature. That’s because untrackable currency works really well for people up to no good or anyone who doesn’t want a lot of attention.
Child pornography, terrorism, and such scams as “rug pulls,” where crypto developers bolt with the investors’ funds, are some of the crimes associated with digital currencies. It’s a lot easier to move crypto around than it is to use gold bars or diamonds to pay for your murder for hire or complete your drug deal.
Cryptocurrency itself has no value system. Bitcoin, Ethereum, and the rest don’t know if they’re being used to fund humanitarian efforts in Ukraine or to pay for hookers for Russian generals.
A war, however, especially one that has closed off many financial avenues to Russia’s oligarchs and wealthiest people might create a perfect storm for rising crypto prices.
Crypto Has Helped Fund the Ukraine Defense
While these malicious acts have not suddenly stopped–Israel recently seized crypto accounts funding terrorism for the third this year, according to a press release from the ministry of Defense–cryptocurrencies are playing an important role in Ukraine’s struggle against invading Russian forces.
“@dogecoin exceeded Russian ruble in value. We start to accept donations in meme coin,” Mykhailo Fedorov, vice prime minister of Ukraine, tweeted Wednesday. “Now even meme can support our army and save lives from Russian invaders. $DOGE owners of the world, @elonmusk, @BillyM2k, let’s do it.”
Tesla (TSLA) – Get Tesla Inc Report CEO Elon Musk has expressed his support for dogecoin, which was created as joke and is considered the first meme coin. BillyM2K refers to “Shibetoshi Nakamoto,” the name used by dogecoin co-creator Billy Markus.
As of Wednesday, the Ukrainian government had raised $50.93 million in crypto donations, according to the predictive blockchain analytics firm Merkle Science, which launched a a Ukraine crypto donations dashboard.
“Donations have been flowing in without the need for any middlemen, currency conversion fees, or admin fees,” said Jacky Goh, CEO and Co-Founder of Rewards Bunny, a crypto cashback rewards platform. “If this were to be done via traditional methods, it would take days or weeks to process.”
Goh said that typically when a crisis happens, “bank runs are soon to follow when citizens rush to withdraw cash and ATMs cannot support the huge demand in such a short period.”
He said that crypto could be one of the factors that may help Ukraine during this crisis.
‘The Catalyst We Have Been Waiting For’
“The general public is seeing more use cases for Crypto,” Goh said. “We did see a rise in crypto volume, and it is a good sign that investors are looking at it as a hedge together like gold, and more crypto-curious individuals are getting a better understanding of crypto with the recent news.”
“The conflicts in Ukraine are the catalyst we have been waiting for in the crypto markets, as they relate to decoupling the traditional markets and those existing on the blockchain,” said Alex Lemberg, CEO of Nimbus Platform. “This catalyst is affecting not just how the retail and institutional participants see the markets but also sovereign nations as well.”
Lemberg noted that people will focus on just how susceptible FIAT currencies are to destabilization events and just how easily those events can be set into motion.
“The Ruble is getting massacred and the ripples will be felt all over Europe and Asia,” he said. “I believe that we will see continued adoption and heavy inflows into the Crypto markets at a much faster rate than anticipated.”
Lemberg added that he wouldn’t be surprised if the numbers mirror those anticipated for 2024 coming in 2022.
“The current crisis in Ukraine has certainly expanded the awareness of crypto use-cases throughout the world,” said Micah Carnahan, cryptocurrency expert and analyst with Finder. “Numerous avenues for donations have appeared in an effort to help the Ukrainian people.
He noted that bitcoin has shot up from around $34,000 to nearly $45,000 since the start of the Russian invasion and “the increased demand for the world’s first cryptocurrency was likely encouraged by a series of sanctions levied against Russia.”
‘A Use-Case Test’ for Crypto and Alternative Assets
Carnahan said the rush to alternative assets has prompted the Ukraine government to request Russian crypto wallet addresses to be blocked from transacting on major exchanges, but Coinbase, Binance and Kraken have so far refused these requests.
Kraken said in a statement that the exchange cannot comment on specific cases, “we have always advocated for crypto on the basis that it empowers the rights and interests of the individual over that of any particular interest group, political faction, or government entity.”
“Freezing access to digital assets of citizens from an entire country does not necessarily punish those who are actually responsible and who may have already prepared for the possibility of blanket sanctions,” Kraken said.
“I wouldn’t call this a breakthrough, but the situation has been a use-case test of whether Bitcoin can work as a decentralized alternative asset—and it seems that it can,” said Tamas Muller, growth manager for the international broker comparison site BrokerChooser.
Demand has soared in the conflict zone, Muller said, and both Ukrainians and Russians “escape” their money to cryptocurrencies to an extent that bitcoin’s rate could finally detach from stock market movements.
He added that “aids, bounties, etc. that can also be transferred in crypto can also help in mainstream adoption.”
The U.S., the U.K., Canada, and the European Union recently announced that they would disconnect SWIFT, a consortium of financial institutions worldwide, from “selected” Russian banks.
“The exclusion from SWIFT will also help bring possible alternative financial channels to light,” he said, “but cryptocurrencies are not large enough to allow Russians to evade the sanctions. However, this can help in the appreciation of the trustless money concept.”
A trustless system is where the participants do not need to know or trust each other or a third party for the system to function.
“I’m not sure that the current rally will be permanent, as there are still a lot of other trends that will affect rates, from inflation to more crypto regulations worldwide,” Muller said. “The crypto market will probably stay very volatile in the coming months.”
Scott Ewing, Founder and CEO Pyrrho said “critics of cryptocurrency may focus on the possibility that Russia may ameliorate the effect of economic sanctions through the use of bitcoin or other cryptocurrencies.”
“However, innocent civilians in all countries affected by the war may also benefit from the potential flow of funds through decentralized channels,” he said. “I think the net effect is likely to be that the war does not change people’s minds.”
