Cryptocurrencies Take Center Stage Amid Russia-Ukraine Geopolitical Crisis
VYSYN Weekly Insights #87: Cryptocurrency plays a pivotal role in fundraising Ukraine war efforts
The recent Russian invasion of Ukraine has spurred massive activity on several cryptocurrency networks, pushing the use cases of these digital assets to the fore. Among other developments, Bitcoin has been legalized in Ukraine and has played a pivotal role in fundraising Ukraine war efforts.
In this week’s edition of the VYSYN Release, we will analyze how the ongoing crisis highlighted crypto’s potential and pushed digital assets to the center stage. We will also evaluate if the current surge in crypto asset prices is sustainable amid the ongoing geopolitical conflicts.
Russia’s attack on Ukraine sparks cryptocurrency volatility
The ongoing conflict between Russia and Ukraine has unsurprisingly brought about a lot of fear, uncertainty, and doubt (FUD) to the global financial markets. Prices of stocks plummeted heavily and the cryptocurrency market also felt the impact.
Immediately after the Russian invasion began, the leading cryptocurrency, Bitcoin, plummeted to its lowest level in a month. The digital asset fell by as much as 7.9% on Thursday, February 24th, with its price slipping below $35,000. Several other coins that typically move in tandem with Bitcoin also lost a substantial percentage of their values, with Ether losing as much as 10.8% and sinking below $2,400 on the same day.
Following the price slump, several market analysts opined that Bitcoin’s status as a safe-haven asset had broken down. Investors appear to be favoring Gold as the metal rose by about 4% to $1,924. The analysts noted that Bitcoin’s close alignment with stock market volatility has greatly changed its traditional safe-haven narrative.
Speaking with CNBC last week, a crypto market analyst at the Japanese Bitbank exchange, Yuya Hasegawa said: “Bitcoin’s safe haven narrative has almost completely fallen apart as the rising possibility of military conflict and the worsening U.S.-Russia relationship puts the wider financial market in risk-aversion mode.” Analysts suggested that Bitcoin might be headed below the $30,000 mark as market sentiments continue on the downtrend.
Cryptocurrencies offer Ukraine a lifeline and BTC/RUB volumes surge
As several other traditional payment systems cease operations in Ukraine, the country’s authorities legalized cryptocurrencies and solicited support from the crypto community. This move pushed activity on several cryptocurrency networks to new levels as donations from different parts of the world poured in via these digital assets.
Within the first 24 hours, several Ukrainian NGOs received more than $4 million worth of crypto donations to support the military. Latest updates reveal that the Ukrainian government has received a whopping $26 million in crypto amid the Russian invasion.
Out of this figure, more than $14 million has been disbursed as the crypto donations are going toward purchasing necessary supplies, including food, gas, and military equipment. However, there have been growing concerns of Russian oligarchs leveraging cryptocurrencies to evade sanctions from the West.
As a part of economic sanctions imposed following the invasion, Russian banks have been barred from accessing the SWIFT international payment system, which underpins global financial transactions. As a result, the Russian Ruble hit record lows, shedding over 25% of its value within 24 hours to trade below 1 U.S cent.
(Source: Trading Economics)
To mitigate losses, Russian investors scrambled to move out of the Ruble amid rising fear of stricter sanctions, driving Ruble-denominated Bitcoin volumes to nine-month highs. According to data tracked by the crypto market data provider, Kaiko revealed that BTC/RUB trading volume surged to almost 1.5 billion RUB, its highest level since the May 2021 bull run.
Amid these rising Bitcoin trading volumes in Russia, Ukrainian authorities have implored eight top crypto exchanges to block Russian users from accessing their services. This move comes off the back of growing concerns that digital currencies are being used to evade sanctions. Although the crypto market has made a rebound within the past 48 hours, tensions persist.
Bitcoin outperforms gold but volatility remains a threat
Despite suffering a major setback immediately after the invasion, Bitcoin has bounced back. The digital asset experienced a massive surge, pushing it to settle above the $44,000 mark. Commenting on Bitcoin’s massive comeback, analysts opined that the digital asset appears to have “decoupled” from stock markets.
Marcus Sotiriou, an analyst at the digital asset brokerage firm GlobalBlock said, “ We have seen crypto be correlated closely to the US stock market for months, but Bitcoin is showing signs of decoupling from this correlation in the short term… It is also fascinating that, after a week into geopolitical uncertainty, Bitcoin is outperforming gold, which is known as a safe-haven asset.”
Now, the big question on every trader’s mind is if the current market uptrend will last longer. It is crucial to recall that the cryptocurrency market has been on a downtrend over the past three months. Bitcoin has lost more than 30% of its value since the November ATH of over $69,000. Several factors, including current geopolitical events, regulatory uncertainty, the prospect of interest rate hikes by the US Federal Reserve Bank, and many more have weighed on prices.
However, on the other side, Bitcoin has demonstrated resilience in the face of turbulent geopolitical conditions. It’s drop to $35k quickly rebounded and it has repeatedly bounced back from sub-$40k levels. As the Russia-Ukraine war unfolds, Bitcoin may prove to be an asset which outperforms. It is certainly highlighting one of it’s impressive use cases in fundraising the Ukraine war efforts and we may observe it playing an even greater role as the war continues to unfold.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocation, versatile marketing support, and tech assistance.