How Crypto is Being Used in the Russia-Ukraine War

Authored by Makara


Published March 15, 20222 mins

Cryptocurrency is playing an important role in the Russia-Ukraine war, which has provided a real-time demonstration of the unique characteristics of this emerging asset class. 

As the conflict and use case for crypto evolves, the price of Bitcoin continues to swing up and down (sometimes by double digit percentages) while investors grapple with the role of the asset class in wartime. 

Bitcoin prices outpaced gold immediately following US President Joe Biden’s February 24, 2022 speech on Russia sanctions. Some investors seemed to regain their appetite for crypto, deeming the sanctions lighter than expected.

At the same time, many war-impacted investors turned to crypto as a safe-haven asset (relative to their native currency). Although cryptocurrencies continue to be tightly correlated with recent movements of the stock market, Bitcoin is largely viewed as an asset with unique characteristics and its price movements recently reflected this status.

Bitcoin and Gold Prices Following President Biden-s February 24th Speech - PERCENTAGE CHANGE


Over the following three weeks after February 24th, Bitcoin continued to outperform the precious metal (through March 14th). The outperformance may be due to investors’ recognition of Bitcoin’s unique characteristics:

- A borderless and apolitical form of currency

- An aspirational store of value

- A speculative investment vehicle

Because of these defining characteristics, cryptocurrency has provided utility to both sides of the war. As Russia was cut off from the global financial market, its currency (the Ruble) dramatically collapsed in value and bank runs made it difficult for average citizens to access cash. The weakness in the Ruble is thought to have driven an increase in Bitcoin demand for two primary reasons:

Inflation hedge: Many Russian citizens converted their savings to Bitcoin to maintain their purchasing power and protect their wealth from Ruble hyperinflation.

Wealth protection: Sanctioned Russian oligarchs tried to shield their assets from being frozen by foreign governments by swapping their traditional assets to cryptocurrencies.

Ukraine also benefited from the efficient transfer mechanism of cryptocurrency. To support Ukraine and other front-line humanitarian organizations, in a matter of weeks, crypto holders sent over $54 million in cryptocurrencies which provided immediate financial support.

With an unknown outcome to the war, investors should continue to monitor the use of this asset class as an alternative to the global central banking systems, as this is one of the primary investment theses for cryptocurrencies.

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