Russia Can’t Rely On Crypto As A Shield Against Crippling Sanctions, Analysts Say

Using crypto as a shield to save the country’s financial system from further collapse may not be the best solution for Russia in its ongoing invasion of Ukraine.

As Russia continues to harass the country with bombs and missiles, many expect it to deal a heavy blow to cryptocurrencies as well.

But no.

Bitcoin, it turns out, has just crossed the $40,000 mark as the Russian currency plunged to a record low and Moscow was hit by new economic sanctions.

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According to the latest data from CoinMarketCap, Bitcoin was up 14% in the past 24 hours to $43,163, a record high since Feb. 20.

Other cryptocurrencies also rose in value. Ethereum climbed to 10% on Tuesday and reached $2,878 while Dogecoin rose to around 6%.

Terra and Solana also experienced significant value spikes. Terra was up 9.5% while Solana peaked at nearly 8%.

About explosions and sanctions

After the Russian invasion of Ukraine on February 24, Bitcoin’s value fell along with other cryptocurrencies.

On the first day of the occupation, the crypto market plummeted to a total of $1.6 trillion in market cap, about 5%. An hour after the war broke out, Bitcoin fell by $2,000 to $35,000.

Aside from the crypto industry, stock markets also took a beating during the ongoing crisis, with the Dow Jones Industrial Average falling 1.4%.

According to Bendik Schei, head of Arcane Research, investors are trying to “get out of the ruble” because of the “drastic devaluation after all the sanctions”.

In fact, more crypto users have moved their assets from Bitcoin to Tether as the latter is as “stable” as the US dollar.

“This is where they currently find the most comfort. Under the current market conditions, I’m not surprised that investors, at least those in Russia, are looking for stablecoins… this is about saving their money, not investing,” Schei added.

BTC total market cap at $829,280 billion in the daily chart | Source: TradingView.com

The collapse of the great rubble

As diplomatic tensions unfold, Western countries have frozen Russia’s central bank assets to make it more difficult for the country to counter the impact of the sanctions on their economies.

Economists refer to the “rainy day fund,” which Moscow authorities had admitted was the safety net for the invasion of Ukraine.

As the US and European countries directly use international banks to enforce sanctions, Russia is trying to reach out to financial institutions willing to deal with them.

Rather than relying on foreign exchange reserves to boost the declining ruble, Russia has lost access to the money it holds in US dollars.

The Russian economy was already in free fall on Monday. The ruble fell to an all-time low, the central bank raised its benchmark rate to 20% and the stock market remained closed.

Crypto as a shield not enough

According to cryptocurrency specialists, the situation in Russia is different, with less room for maneuver due to the magnitude of the economic damage and the limited use of digital currencies.

Unlike other countries, Russia has long been a participant in the international economic and financial market.

About 80% of all foreign exchange transactions in Russia are in US dollars.

Cryptocurrency analysts are now saying that Russia alone will not be able to avoid sanctions for its invasion of Ukraine based on cryptocurrencies.

Related article | Bitcoin falters after Putin’s nuclear deterrent warning

The United States, the United Kingdom, the European Union and Canada announced new sanctions against the country’s central bank on Monday.

The US Treasury Department is now restricting the flow of Russian foreign exchange reserves worth $640 billion.

“It is very difficult to move huge amounts of crypto and convert them into usable currency,” said Ari Redbord of TRM Labs, a blockchain intelligence company.

If Russia is to free itself from the misery of the sanctions of the West, it must do more than just use cryptocurrencies and believe it will be safe there.

Featured image from Business Today, chart from TradingView.com

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