With the conflict between Ukraine and Russia ongoing, some interesting changes are beginning to occur, including the crypto market. Since the conflict intensified, Russians, specifically oligarchs, are buying up large amounts of Bitcoin. But why exactly is this happening?
What Has Happened in Russia So Far?
As Ukraine continues to receive aid, more and more sanctions are being placed on Russia. The United States, European Union, Japan, and the United Kingdom have all placed sanctions on Russia, with the country's banks cut off from SWIFT, the messaging system that underpins global financial transactions.
These sanctions are placing a lot of stress on Russia's economy, and Russian citizens are now worried about the collapse of their national currency, the ruble. This concern is by no means irrational, as the ruble's value has already decreased significantly, and there's a good chance that this drop may continue.
But, while many have to sit and wait to see what happens, others have the funds to pursue other financial avenues in light of this economic meltdown, including wealthy Russian oligarchs. Most Russian oligarchs accumulated a huge part of their wealth immediately after the fall of the Soviet Union in 1991. Oligarchs are extremely wealthy, so they have the means to buy up a large amount of an asset if they please.
But why is Bitcoin now such a sought-after asset for these wealthy individuals?
Why Are Russian Citizens Buying Up Bitcoin?
Well, Bitcoin is a decentralized digital currency that many of the world's banks and other financial institutions don't recognize. It falls outside the traditional sphere of finance, so it is difficult to place sanctions upon, while its price is more resilient than the national currency.
The value of Bitcoin initially plunged upon news of Russia's invasion of Ukraine, amid concerns that the conflict would have a knock-on effect on the market. However, Bitcoin, along with other tokens, quickly began to bounce back as ruble to Bitcoin trading soared on crypto exchanges. Converting the declining ruble to Bitcoin, or another crypto means that your wealth is no longer closely tied to Russia's economy.
But it's not just Bitcoin that's being bought up. Tether, a decentralized stablecoin, has also become a popular asset among wealthy Russians. This is mainly because the value of Tether is pegged to the value of the US dollar, which means that its price will remain close to one dollar so long as the US economy remains stable. Such factors and loopholes are what may help Russian citizens bypass sanctions altogether.
However, the founder of popular crypto exchange Binance, Changpeng Zhao, claims that crypto won't help Russians evade sanctions, as crypto is currently "too small for Russia". Because crypto doesn't have a strong enough presence in the current global market, Zhao believes that it just isn't going to do what Russian oligarchs are hoping in terms of sanction-dodging. Furthermore, cryptocurrencies like Bitcoin are easily traceable with a bit of work.
On top of this, the US is currently considering placing sanctions on Russia's crypto market to stop international transactions in the form of crypto, so buying up tokens in bulk may prove futile if this sanction is officially introduced.
The Crypto Market May Boom Due to These Sanctions
While the situation between Russia and Ukraine is now dyer, it is having an unusual effect on the crypto market. As more sanctions continue to be placed, and more individuals attempt to dodge them, we may see a continued increase in the value of a number of different tokens, including Bitcoin and Tether.