Using crypto as shield to save the country’s financial system from further collapse may not be the best solution for Russia in its ongoing invasion of Ukraine.
Many believe that Russia will continue to bombard the country with missiles and bombs.
But, nope.
Bitcoin, as it turns out, has just breached the $40,000 mark while Russia’s currency sank to a record low and Moscow was hit with new economic sanctions.
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CoinMarketCap’s latest data showed that Bitcoin rose 14% in 24 hours to $43,163, a record-breaking high set since February 20th.
Others cryptocurrencies saw their value rise as well. Ethereum reached 10% on Tuesday Dogecoin rose to approximately 6% at $2,878
Terra and Solana saw significant price increases. Terra saw a 9.5% increase, and Solana saw a nearly 8% rise.
Explosions and Sanctions
After Russia’s invasion of Ukraine on February 24, Bitcoin’s value sank together with other crypto.
The crypto market plunged to $1.6 trillion, or roughly 5%, in the initial day of occupation. Bitcoin plummeted by $2,000 to $35,000 an hour after war broke out.
Apart from crypto, the stock market also suffered during the crisis. The Dow Jones Industrial Average fell by 1.4%.
According to Arcane Research head Bendik Schei, investors are “trying to get out of the ruble” because of its “drastic devaluation after all the sanctions.”
In fact, more crypto users have been moving their assets from Bitcoin to Tether, since the latter is popularized as “stable” as the US dollar.
“This is where they find the most comfort at the moment. Under the current market conditions, I’m not surprised to see investors, at least those in Russia, seeking stablecoins… this is about saving their funds, not investing,” Schei added.
Source: TradingView.com| Source: TradingView.com
Great Rubble Collapse
With the diplomatic tensions unfolding, western countries have frozen the assets of Russia’s central bank to make it harder for the country to counter the sanctions’ effects on their economy.
Economists are referring to the “rainy day fund,” which Moscow authorities had admitted to be its safety net for its invasion of Ukraine.
Russia wants to make contact with banks willing to help them, as the US and European nations directly use foreign banks to enforce sanctions.
Russia is no longer able to access US dollars funds, and cannot rely on its currency reserves for support of the falling ruble.–
On Monday, Russia’s economy was already in free fall. The ruble dropped to record levels, while the benchmark rate at the central bank was increased to 20% and the stock market remained closed.
The Crypto as Shield is Not Enough
According to cryptocurrency specialists, Russia’s situation is different, with the country having less room to maneuver because of the magnitude of the economic damage and its limited use of digital currencies.
Russia is a member of the international economic market and financial markets for a longer time than other countries.
Around 80% all Russian foreign currency transactions are made in US dollars.
Analysts in cryptocurrency are saying now that Russia cannot avoid sanctions against Ukraine for the invasion. This is based on cryptocurrencies.
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New sanctions against the country’s central bank were announced by the United States, the United Kingdom, the European Union, and Canada on Monday.
US Treasury currently restricts flow of Russian foreign currencies worth $640 million.
“It is very difficult to move massive amounts of crypto and convert it to usable currency,” Ari Redbord of TRM Labs, a blockchain intelligence firm, said.
For Russia to be able to extricate itself from the misery of the West’s sanctions, it must do more than just turn to cryptocurrencies and believe it is where it will be safe.
Featured image taken from Business Today. Chart by TradingView.com