As the Russian-Ukrainian conflict erupted, markets shook as the S&P 500 and fiat currencies plummeted, while oil and other commodity prices rose sharply on fears of supply disruptions. Although the cryptocurrency markets also initially suffered, bitcoin persisted.
Cryptocurrencies behave like stocks in difficult times.
Bitcoin has thus surpassed most traditional asset classes, including traditional "safe" fiat currencies such as the Japanese Yen (JPY) and the Swiss Franc (CHF), which are generally considered hedges against geopolitical upheavals.
It turns out that in times of crisis, cryptocurrencies began to reveal their true nature and proved that they are not just another traditional asset.
Corresponding to this is the correlation between the BTC and the S&P 500 index, which has begun to weaken, suggesting that the time for bitcoin as a safe asset is likely to be on the horizon again.
Cryptocurrencies know no boundaries
The volume of bitcoin trade in the Russian ruble and the Ukrainian hryvnia peaked almost immediately after the Russian invasion, underlining the importance of cryptocurrency in these countries.
The collapse of Russia's national currency and limited access to green banknotes during a wave of global sanctions have forced the people of Russia to plunge into cryptocurrency number one and other digital assets.
Meanwhile, the nature of cryptocurrencies as a borderless currency has allowed Ukraine to raise millions of dollars in cryptocurrencies to support its military and hacktivist groups. Even the Ukrainian government accepts donations from BTC, ETH and USDT and has already raised more than $ 63 million.
Relying on traditional banks is becoming increasingly difficult at a time when governments are in chaos. In both Russia and Ukraine, ordinary people are turning to cryptocurrencies as an alternative to financial institutions that restrict their access to foreign currency and bank accounts.
Cryptocurrencies are transparent
Regulators have called on cryptographic exchanges to comply with sanctions over fears that Russian government officials could move their assets to cryptoactive assets to avoid Western sanctions. Some stock exchanges have blocked all transactions related to the accounts of sanctioned persons. For example, Coinbase blocked more than 25,000 addresses associated with Russia.
However, Binance believes that the concerns are exaggerated because it is almost impossible to hide large numbers of cryptocurrencies. Because cryptocurrency transactions are recorded in a public ledger, they create a permanent record that is undesirable for organizations that want to hide their identities.
Services that mix flows of potentially identifiable cryptocurrencies, known as tumblers, are not designed to transfer large amounts and appear to be slow.
Cryptocurrencies are neutral
Cryptocurrencies such as Bitcoin have been invented to be neutral. They were designed so that no country, government, bank or other institution could ban their use.
To put pressure on Putin's regime, the Ukrainian government has proposed banning all cryptocurrency transactions from Russian citizens, regardless of sanctions, but some cryptobourses have disagreed.
However, geo-blocking can be imposed on stock exchanges under a legal mandate from US or European authorities. Given that Russia ranks 18th in the world in cryptocurrency, accounts for 14% of the total cryptocurrency market and is the third largest bitcoin miner in the world, it would be a big blow to the cryptocurrency market.
Conclusion
Cryptocurrencies exist to serve people outside politics, not governments. It offers a helping hand to all who need it - they connect the world and do not know nationalities or borders.
Author: STA