Cryptoverse: Bitcoin gains conflicting currency credentials

A bitcoin sign appears in a window in Toronto, May 8, 2014. REUTERS/Mark Blench

MARCH 1 (Reuters) – Bitcoin has skyrocketed since the Russian invasion of Ukraine, backed by people in those countries looking to store and transfer money in anonymous, decentralized crypto.

The Russian ruble-denominated bitcoin trade entered a peak when the invasion began Thursday, with daily volumes up 259% from the previous day to 1.3 billion rubles ($13.1 million), according to data from CryptoCompare.

Meanwhile, in Ukraine, cryptocurrency exchange Kuna has seen its daily trading volume more than triple to 150 million hryvnia ($5 million).

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

“Basically, having a currency that is not under the control of the government and is not affected by emergency laws … is really interesting,” she added. “Maybe this is how Russia goes about its value. Likewise, on the other side, there was ‘this is how people are going to get value for the Ukrainians.’”

In the five days since Russia invaded Ukraine on February 24, Bitcoin is up 13%, while the often-mimicking US stock index S&P 500 is up 2% and gold is now largely flat after gaining as much as 3.5% on the day. invasion.

Coinglass data showed that on the day of the attack, about $300 million of short Bitcoin positions were liquidated, while Singapore-based QCP Capital said that a “significant portion” of leveraged long positions had been eliminated.

In addition to being largely anonymous, crypto holdings and transactions are often kept in wallets on decentralized platforms that can be accessed from anywhere.

Enter OLIGARCHS

“Bitcoin can be a potential safe haven for wealthy Russians who are avoiding sanctions as there will be no censorship over the Bitcoin network and over cryptocurrency transactions,” said Ipek Ozkardeskaya, chief analyst at Swissquote Bank.

“Cryptocurrencies can serve as a powerful store of value for a large portion of holdings that do not need to be liquid.”

However, for crypto enthusiasts, the fact that such collectibles can provide a way around sanctions can be a double-edged sword.

“This could lead to regulations from NATO countries against the use of cryptocurrencies, but the flip side is that there could be broader adoption in places of geopolitical turmoil,” said Katie Talati, head of research at digital asset management firm Arca.

Ukraine was also quick to spot an opportunity in the world of cryptography and anonymity. Deputy Prime Minister Mikhailo Fedorov tweeted bitcoin and ether wallet addresses, along with a plea: “Stand with the people of Ukraine. Now accepting crypto donations.”

The Fedorov government and Ukrainian NGOs have raised more than $22 million in cryptocurrency following the appeals, according to blockchain analysis firm Elliptic. Read more

While bitcoin may emerge as a currency of choice in areas of geopolitical risk, market players caution that there are differing views on whether it could widely become a “safe haven” asset, a form of digital gold.

For Zach Friedman, co-founder of crypto brokerage Secure Digital Markets, bitcoin’s post-invasion gains are compelling a “narrative around the Bitcoin store of value during turbulent times.”

Staplecoins on fire

Elsewhere: money is flowing into “stablecoins,” which are pegged to traditional assets like the US dollar.

As of Friday, stablecoin transactions accounted for more than 83% of the total 24-hour cryptocurrency trading volume, according to CoinMarketCap.

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

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

Additional reporting by Lisa Matakal and Medha Singh in Bengaluru, Alun John in Hong Kong and Vidya Ranganathan in Singapore; Editing by Vidya Ranganathan and Praveen Shar

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