Russia-Ukraine Conflict and Cryptocurrency

As we enter a full-week of Russia's full-scale invasion of Ukraine, the cryptocurrency market has been volatile to say the least. The overall cryptocurrency market-cap tracked by CoinMarketCap was hovering above CA$2.2trillion a day before the invasion on Feb 23, 2022. As news of the invasion was televised, $250billion was wiped off the market cap dropping the overall market to $1.95trillion, the market cap has more than recovered it's loss, pushing a market cap of $2.4trillion.

Why Did the Market Recover?

Bitcoin which dropped down to $44k levels, has climbed $10k or roughly 23% in under a week. So why did the market drop and then seemingly reverse its course overnight? The drop in the cryptocurrency market coincided with the decline in stock markets, as fear and uncertainty hit the economy. The reversal however, is due to the increased demand for cryptocurrencies.

• Sanctions on Russia has devalued the Russian Ruble by 30% over the course of the week, prompting Russians to look into cryptocurrency as a store of value to prevent further deterioration of their hard earned Rubles.
• ATM Withdrawal Limits on Ukraine: The National Bank of Ukraine placed a withdrawal limit of 100,000 Ukrainian Hryvnia per day and halting exchanges for Ukranians trying to obtain foreign currencies.

The situation in Russia/Ukraine has brought to light the value of Bitcoin and cryptocurrencies as an alternative monetary network. Data tracked by a cryptocurrency research provider Kaiko shows that the ruble-bitcoin pair volume surged to a nine-month high.

Crypto's Involvement in the Russia-Ukraine Conflict

Adoption and Decentralized

The events that played out with Russia and Ukraine demonstrate the growing adoption of cryptocurrencies and the way cryptocurrencies were meant to be: decentralized. Not one entity should be able to exert authority and control over the financial system.

Even though some blockchains are decentralized by design, the on-ramp to convert fiat to crypto is generally done with a centralized exchange. Vice Prime Minister of Ukraine Mykhailo Fedorov pleaded to crypto exchanges on twitter: "I'm asking all major crypto exchanges to block addresses of Russian users. It's crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users."

"...Our mission is better served by focusing on individual needs above those of any government or political faction. The People's Money is an exit strategy for humans, a weapon for peace, not for war." - Jesse Powell, CEO Kraken

Mykhailo's request is a touchy subject many people disagree with as censorship resistance and decentralization is one of the core principles of crypto. Not only that, sabotaging ordinary users and making them suffer for something they have no control over does not sit right. Kraken CEO Jesse Powell rejected Mykailo's request in a tweet

This was the same thought for Coinbase on a post by Decrypt: "A unilateral and total ban would punish ordinary Russian citizens who are enduring historic currency destabilization as a result of their government’s aggression against a democratic neighbor."

Cryptocurrency Donations

Mykhailo Fedorov has been embracing cryptocurrencies as he tries to block Russians from accessing centralized exchanges while soliciting for donations to fund the defense of the invasion. So far the Ukraine government has received more than US$30 million in cryptocurrency donations in Bitcoin (BTC), and Ethereum (ETH). Ukraine has opened up other cryptocurrency wallets for donation such as Polkadot (DOT) and Solana (SOL) and has received donations in the form of NFTs as the well-known collection CryptoPunk worth $200k was donated to the wallet.

What Does This Mean for Crypto?

From a crypto point-of-view, the events unfolding in the Russia-Ukraine conflict will drive the adoption and demonstrate the appeal for cryptocurrencies. Many will come to understand and even embrace the "double-edged" decentralized nature of cryptocurrencies. Cryptocurrency and the financial system should be open to everyone and non-discriminatory whether it be used for "good" or for "evil".

The plausibility of cryptocurrencies as a world-wide financial system is proven with the accepted donations being received and spent on humanitarian and military efforts in Ukraine; blockchain and crypto is more efficient in terms of speed and fees without any intermediaries in comparison to the traditional financial system.