Bitcoin: An Alternative to Mobilize Money in the Midst of War

Since the beginning of the conflict in Ukraine, cryptocurrency operations have tripled.
The war has fueled a trend to use Bitcoin after the sanctions imposed by the West on Russia.
Ukraine is benefiting from the anonymous donations it receives from around the world to keep up its fight against the Russian invaders.

The Russian invasion of Ukraine has made Bitcoin and other cryptocurrencies become a storage and exchange alternative for those who live in countries in conflict, as they allow money to be transferred anonymously and decentralized.

BTC has been able to regain some of the ground lost in recent weeks with the growth of trade in the ruble-denominated cryptocurrency in Russia.

Since the beginning of the invasion, inter-day transaction volume has been increasing by 259% on average to 1.3 billion rubles ($13.1 million), Reuters notes, citing data from CryptoCompare.

On the other hand, in Ukraine as well, daily cryptocurrency trading volume has tripled, according to crypto exchange Kuna to about 150 million hryvnias (about $5 million).

BTC usage grows in Eastern Europe

Experts have noted a growing trend in the use of Bitcoin for value transfer as a result of the war in Eastern Europe and sanctions imposed by Western powers on the Russian government, said Bea O’Carroll, managing director of the investment firm in Radkl digital assets.

"Basically, to have a currency that is not controlled by the government, that is not affected by emergency acts... is really interesting," Radkl said. "Maybe this is how Russia gets its value moved around. Equally, on the other side, there was 'this is how people are going to get value to the Ukrainians'." she added.

Bitcoin has climbed 13% since Russia decided to invade its neighbor Ukraine. While the US S&P 500 index also rose about 2%, whilst gold, which is usually a traditional safe haven, only rose 3.5% in price on February 24 when the invasion began.

Nearly $300 million in short BTC positions were liquidated that day, according to data from Coinglass. QCP Capital, the Singapore-based digital assets trading firm, reported the removal of a large volume of “long leveraged positions”.

Russian oligarchs would be using cryptocurrencies

Digital assets offer the advantage to users in these countries of not being subject to the sanctions imposed after the announcement of the disconnection of the SWIFT system. Crypto storage and transactions are done from decentralized platforms that only the account holder has access to anywhere.

Russian oligarchs allied with President Vladimir Putin and those most affected by Western sanctions are believed to be using Bitcoin to evade sanctions.

“Bitcoin could be a potential safe haven for Russian oligarchs avoiding sanctions as there will be no censorship of the Bitcoin network and cryptocurrency transactions,” noted Swissquote Bank Senior Analyst Ipek Ozkardeskaya.

He also commented that in general "cryptocurrencies could act as a powerful store of value for most of the holdings that don’t need to be liquid".

On the Flipside

This situation has generated concern among users of cryptocurrencies, since it could increase regulations by NATO member countries.
It is also not ruled out that in Russia and Ukraine, as well as in the entire region, the adoption of BTC and cryptocurrencies will increase.

Ukraine has been benefiting from cryptocurrencies by calling on the entire world for support to keep up its fight against the Russian invader. Ukrainian Deputy Prime Minister Mykhailo Fedorov called for support through transfers to a BTC and Ether wallet.

"Support the people of Ukraine. Now we accept donations of cryptocurrencies," the official wrote through his Twitter account.

The Ukrainian government and non-governmental organizations in that country have raised just over $22 million in cryptocurrency since then, reported Elliptic, a blockchain analytics firm.

Why You Should Care

Although Bitcoin is becoming a currency to deal with conflicts in areas of high geopolitical risk, analysts and market players themselves are still not sure that it is an asset – safe haven like gold, given its volatility.

However, they do feed into the “narrative about bitcoin’s store of value during turbulent times,” says Zach Friedman, co-founder of Secure Digital Markets, a cryptocurrency brokerage firm.