How will the Ukraine Situation Affect the Crypto Markets?

Ukraine is currently on its fifth day of a Russian invasion which has captured global attention and threatened to shift the world order. Much like any asset, the cryptocurrency market has been impacted, and the effects are more negative than positive due to uncertainty. However, this invasion brings a more positive long-term outlook for cryptocurrencies.

Ukraine, a country on the border of Russia and a former member of the Soviet Union, has been teetering in allegiance with both the East and the West over the past 30 years. Recently, its citizens and government have been aligning more with the West and NATO, which Russia views as a threat since they do not want NATO troops and bases so close to their border.

In 2014, separatists aligned with Russia took control of two regions near the border. Russia recognized these groups as independent and used this as a reason to invade the region. Ukraine, along with the majority of the world, are in opposition to Russia’s decision and have been helping Ukraine to fight back against their invaders. 

When the news broke about the impending invasion, the stock market faced a sharp decline, as the uncertainty of how the war would end scared investors. Cryptocurrency markets, as a natural extension of the stock market, also faced a steep decrease in value. During times of uncertainty, risky investments become less favorable compared to safe-haven assets like gold and other commodities. This is unfortunate, as some see cryptocurrencies as a hedge against other assets, but the actions of investors demonstrate that this is not the case. 

On February 26, the official Twitter account of Ukraine posted a Tweet soliciting crypto donations in Ethereum, Bitcoin, and USDT. Naturally, many assumed that the account was hacked, but it was later confirmed that the addresses were legitimate and that anyone could donate to help the country fight their war. A mere two days later, they have received over $16 million in crypto donations, a staggering amount that is sure to make a big difference in the war or relief efforts. 

This new use case for crypto, as a way for a country to receive donations from anyone, anywhere in the world, is fantastic, and represents the key tenets of cryptocurrencies as a decentralized and trustless form of money. 

Additionally, after facing sanctions from major governments and entities, Russia has found itself unable to transfer money through the international banking system. This has led some to speculate that they will use cryptocurrencies as a means to circumvent sanctions and still transact in global business. However, as noted by GM of RippleNet Asheesh Birla, cryptocurrency, along with its transparent nature and lack of liquidity, would not be sufficient enough to replace Russia’s current banking transactions.

Cryptocurrencies are serving two main purposes in the Ukraine-Russia saga: helping those who are transparent and getting invaded, while hurting those who are trying to circumvent international sanctions and invading. Even though the price of cryptocurrencies has been negatively impacted in the short term, this event has demonstrated two different ways that cryptocurrencies can impact society on a global scale. As time goes on and cryptocurrencies become more commonplace, these use cases will become even more prevalent, and cryptocurrencies will come closer to their goal of being a truly global, digital, trustless, and decentralized currency. 

By Lincoln Murr 

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