Russia’s invasion of Ukraine and the ongoing conflict have produced an inadvertently surprising key component in the fight: cryptocurrency.
Ukraine’s fight against Russia has encouraged people across the globe to donate to the cause, and crypto has provided a creative means to do so. More than $50 million worth of cryptocurrency was sent to the Ukrainian government after a tweet asking for contributions in crypto.
To help pay for its armed forces, the Ukrainian government has also indicated that it intends to manufacture non-fungible tokens (NFTs) to help fund war expenses. In contrast, the United States Treasury has expressed worry about Russian assaults on crypto companies, as well as Russia’s use of crypto as a means of avoiding sanctions. Scammers are also taking advantage of the Russian invasion of Ukraine to defraud donors out of their hard-earned cash.
Economic sanctions have been imposed on Russia as retaliation for its invasion of Ukraine to cut Russia off from the global financial system. Sanctions on prominent Russian figures and financial institutions have made it difficult for American companies to do business with them. Key Russian banks have been banned from the interbank messaging system SWIFT by the United States, the European Union, and Canada, limiting their access to global financial markets. The ruble has plummeted as a result of these sanctions.
Bitcoin and Its Possibilities
These events bore discussions about the use of cryptocurrencies like Bitcoin as an alternative means for those sanctioned to escape from their limitations.
Why? Because central banks aren’t the ones issuing or controlling digital currencies like Bitcoin and other coins. Cryptocurrency transactions do not follow the typical path of financial plumbing when they are transmitted to other users.
The market for cryptocurrencies has become even more volatile as a result of the crisis, and analysts expect this volatility to continue. Increasingly intertwined with the global struggle are cryptocurrency’s growing acceptance and recent convergence with stock markets. These instances have allowed the industry to balloon as curiosity grows increasingly towards investing in cryptocurrency. It’s hardly surprising that platforms that help people find crypto brokers to invest with, for example, Bitcoin Up crypto platform, have seen a sharp increase in popularity.
Following the most recent developments, Bitcoin was trading at over $40,000. Ethereum was trading at roughly $3,000. Experts warned against making financial choices based on news-related panic, regardless of the circumstances.
Bone Fide Wealth CEO and certified financial planner Douglas Boneparth stated that the ability to remain disciplined and stay invested is ultimately what will lead to success or failure. It is becoming clear that cryptocurrency is playing an increasingly important role in the conflict between Russia and Ukraine.
What Happens to Crypto’s Value?
According to a report by the Wall Street Journal, scammers are taking advantage of the chance to steal money intended for Ukrainians in need. Even after the scam was uncovered, the value of the cryptocurrency donated through Peaceful World soared to $50 million thanks to a group posing as the Ukrainian government asking for contributions. Scams are nothing new in the crypto industry, with researchers at Chainalysis estimating that $14 billion had been lost to fraudsters in 2021.
On the other hand, to support those impacted by Russia’s invasion, an NFT of Ukraine’s flag created by UkraineDAO raised more than $6.7 million, with support from one of the members of the Russian feminist punk rock group Pussy Riot. There are also plans to issue Ukrainian NFTs to help the country’s military forces by Mykhailo Fedorov, the Vice Prime Minister of Ukraine and Minister of Digital Transformation. As of this writing, more than $50 million has been raised for Ukrainians harmed by the invasion via crypto contributions.
Meanwhile, the United States Treasury warned cryptocurrency firms to be alert concerning cybersecurity because of fears that Russia may conduct a cyberattack in retaliation for U.S. sanctions. Officials are working with trade associations and exchanges to guarantee that assets are safe and secure as the cryptocurrency market expands.
All these different events, coupled with the fears of Russian sanctions being bypassed through cryptocurrency, have put the spotlight on the industry amid global conflict.
However, when it comes to bypassing these sanctions, experts have weighed in on the possibility and concluded that there would be several difficulties.
It should be noted that Bitcoin’s underlying blockchain technology is a public record of transactions. Thus, it is a simple matter to monitor the transfer of cash from one account to another. Because of this, Bitcoin isn’t a good way to escape the sanctions. It can be said that the largest misconception about crypto is that it is untraceable, which in turn would have made it perfect to use in criminal activities.
Russia’s Condition
Meanwhile, Russian billionaires and businesses are unable to transfer their funds due to a lack of liquidity. To move significant sums of money is improbable as cryptocurrency liquidity is still a fraction of the global currency market. Cryptocurrency exchanges, too, will be on high alert for any suspicious activity.
What can be surmised from all this is that everything from new technology to government regulation has the potential to have a huge influence on the cryptocurrency market, which is still in its infancy.
Regardless of what’s making headlines or the volatility of Bitcoin’s price, investing in cryptocurrencies is very risky. Only invest in cryptocurrency if you’re prepared to lose it, and make sure you’ve already taken care of your other financial obligations, such as setting aside money for an emergency fund, saving for retirement, and paying off any high-interest debt.
If you decide to invest in cryptocurrencies, you should be prepared for the inevitable volatility of the market.
Ollie Leech, learning editor at Coindesk, a cryptocurrency news source, said volatility might be due to an “immature market.” Whether it’s a tweet from a celebrity or a new government rule, anything might cause a price spike. Because of this, many financial experts advise against placing a significant portion of your savings in a volatile asset like cryptocurrency. Cryptocurrencies should be no more than five percent of your whole portfolio, according to several experts.
Inexperienced investors may be apprehensive about day-to-day fluctuations. If you’ve invested using a buy-and-hold strategy, Humphrey Yang, the personal financial guru at Humphrey Talks, believes dips are nothing to be alarmed about. Yang even advises investors to ignore their investment altogether, arguing that keeping an eye on it and letting your emotions get too involved might lead to selling at the wrong moment or making the incorrect judgment. This “set it and forget it” strategy is something traditional long-term investors often follow.
