Cryptocurrencies steal limelight amidst Russia-Ukraine turmoil

• Events in the war-torn countries may act as a catalyst for cryptocurrencies, GlobalData says
• Banks and oligarchs may use cryptocurrency as an alternate means of moving assets in and out of the country due to the ban of Russian banks from the SWIFT.
• Scorching-hot inflation will continue to support Bitcoin prices in the coming months as investors await a crucial statement by the US FED on Wednesday.

Cryptocurrencies have become a prominent feature and can potentially emerge as an alternative payment mechanism amid the ongoing Russia-Ukraine geopolitical turmoil, industry experts said.

Manish Dixit, Principal Disruptive Tech Analyst at data analytics company GlobalData, said that cryptocurrency is politically unbiased and is gradually gaining traction.

While the US Federation has emphasised the importance of regulation, he said that events in war-torn countries may act as a catalyst for cryptocurrencies.

“Following the ban of Russian banks from the SWIFT interbank settlement system, banks and oligarchs may use cryptocurrency as an alternate means of moving assets in and out of the country,” he said.

Nigel Green, CEO of deVere Group, said that scorching-hot inflation will continue to support Bitcoin prices in the coming months as investors await a crucial statement by the US Federal Reserve on Wednesday.

 “The Federal Reserve’s plans for the first interest rate hike since before the pandemic have been well signalled in advance of the official announcement on Wednesday, and it has been priced-in by the markets.

“However, investors will be closely monitoring the US central bank’s statement and analysis for guidance on how it stands on the war in Ukraine and how this could impact the trajectory for other interest rate hikes this year,” he said.

Bitcoin: A credible hedge

As inflation continues to run hot in the coming months, Green said that the price of Bitcoin will continue to be supported as investors look to protect their purchasing power by moving out of cash and into the store of value investments.

“Bitcoin is regarded as a credible hedge against inflation for three key reasons. First, its scarcity – a limited supply of 21 million means that higher demand will push prices up. Second, its accessibility – as an asset it has value and is accepted by the market. And third, its durability – Bitcoin will continue to attract more demand over time,” he said.

After Ukraine’s appeal for cryptocurrency donations, more than $50 million worth of cryptocurrency poured in. Ukraine also plans to mint NFTs to fund its military.

Crypto trading soars in Russia

Meanwhile, cryptocurrency trading in Russia has soared as the rouble continues to be battered by the sanctions aimed at constraining Russia’s economy and severing it from the global financial system.

 “Cryptocurrency-related conversation on Twitter after the start of the Russia-Ukraine conflict revolved around crypto trading of Russia and Ukraine, cryptocurrency donations raised by Ukraine, ban of Russia from SWIFT, sanctions on Russia due to invasion of Ukraine, and whether the use of cryptocurrencies help Russia to evade it,” he said.

Rapid rouble inflation has adversely affected the Russian consumers, with the rouble hitting a 10-year low against the US dollar. This can enable Russian consumers to turn to cryptocurrencies. Countries such as Iran have previously been accused of using cryptocurrencies to bypass sanctions.

Mukesh Singh, Senior Disruptive Tech Analyst at GlobalData, said that Ukrainian citizens may benefit from cryptocurrency as they can convert their wealth into cryptocurrencies and curtail the risk of a banking system collapse.

Moreover, he said that cryptocurrencies can help Russians to evade the crashing rouble.

 “The benefits that cryptocurrencies bring to the current conflict may pave the way for them to become more widely recognised. However, for cryptocurrencies to enter mainstream, countries across the world need to develop a global regulation standard,” he added.

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