Bitcoin is trading at a premium to the Ukrainian hryvnia on many exchanges, both globally and locally, indicating higher demand. On Binance, the world’s largest exchange, bitcoin was trading as high as $45,894 in terms of hryvnia. On Ukraine’s largest exchange Kuna, it was at $46,847, and traded as high as $51,240.
In the US markets, bitcoin was trading near $44,000 as recently as Tuesday night, up 17% from Sunday evening, according to data from CoinDesk.
On Binance, the trading volume of bitcoin against ruble has increased since just before the start of Russian invasion. According to data from Binance, between February 20 and 28, approximately 1,792 bitcoins exchanged hands in the ruble/bitcoin trading pair, compared to only 522 bitcoins in the nine days before that.
Western sanctions have effectively cut Russia off from the global financial network, and Ukraine has imposed strict capital controls.
Crypto is popular in Ukraine and Russia. Ukraine ranks fourth in the global adoption index created by analytics firm Chainalysis. A Russian government report estimated that Russian citizens had more than 12 million cryptocurrency wallets, equivalent to about $20 billion, with approximately 2 trillion roubles.
“Ukraine’s status has brought to light the value of bitcoin as an alternative monetary network,” said Timo Lehs, co-founder of trading platform Swarm Markets.
The typical demand-driven rally for bitcoin is a break from its recent pattern to trade in line with riskier assets like tech stocks.
Bitcoin’s rally this week erased February’s losses. Most other cryptocurrencies were even higher. Ether was up 4.7%. XRP is up 0.7%. Avalanche gained 3.3% and Cardano gained 0.9%.
The tech heavy Nasdaq Composite Index fell 1.2% on Tuesday.
Since bitcoin is traded 24 hours a day, in some cases it is leading a risk asset, not just following.
Last Wednesday, when Russian President Vladimir Putin announced his invasion of Ukraine, US stock markets were closed. Bitcoin fell nearly 6% overnight, then rose 13%. After a day of wild trading, US stocks closed slightly higher on Thursday.
Bitcoin fell by almost 9% from the afternoon of Friday, February 18, until the evening of Monday, February 21, amid reports of a worsening crisis in Ukraine. The US stock markets, which were closed for a holiday on Monday, did not have a chance to react to the news until Tuesday. When they did so, all major indices fell by more than 1%.
Cryptocurrencies have also been noted for their ability to be an outlet for Russians trying to evade sanctions. While cryptocurrencies themselves are not part of the sanctions, the White House is considering adding them.
On Twitter on Sunday morning, Ukraine’s Deputy Prime Minister Mykhailo Fedorov requested cryptocurrency exchanges to block Russian accounts. “It is important not only to freeze addresses associated with Russian and Belarusian politicians, but also to sabotage ordinary users.”
Ukraine’s Mr Fedorov did not clarify whether the request was personal or from the government. Attempts to reach them were unsuccessful.
Crypto exchanges largely refrained from implementing any voluntary restrictions in Russia.
Binance said it would not impose sanctions outright, but that it was taking action against those sanctioned by Western countries. Exchanges Coinbase, Kraken and KuCoin also said they would not freeze Russian accounts without sanctions or legal requirements to do so.
“We do our best to protect human rights and the safety of property. Actions that escalate tensions to affect the rights of innocent people should not be encouraged,” said Johnny Lew, chief executive of KuCoin.
Crypto exchanges regularly comply with court orders and legal requests for their users’ data, similar to regulated banks. There was no indication that the Ukrainian government, alone or in concert, was going to take legal steps to require blocking Russian users.
On the technical side, exchanges have improved their infrastructure over the past several years and will be able to enforce these restrictions if necessary, said Jack McDonald, chief executive of PolySign, which provides crypto-assets for exchanges and other custodians. Creates storage software.
Exchanges have the ability to monitor accounts and transactions, and also know where deposits are coming from. Money from known hacks, for example, can and has been blacklisted.
“It is going to prove difficult for Russia to avoid sanctions using bitcoin,” said Mr. McDonald.
Nevertheless, blocked users will still be able to find unregulated exchanges or even more opaque markets to buy and sell their cryptocurrencies.
Part of Western sanctions include separating Russia from the SWIFT network, a bank-owned consortium that handles millions of daily payment instructions.
The Western ban and ban are “reinforcing the logic of blockchain products that will compete with the SWIFT network,” said Oanda analyst Edward Moya.
Investors are buying now, he said, in anticipation of a wave of investments on manufacturing those products.
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