Crypto’s Role in the Russian Invasion of Ukraine

Before we dive in, we first wanted to express our sorrow for what is occurring in the world right now. Your faithful CoinSnacks writers have spent weeks in Ukraine exploring its cities, people, and underrated startup culture. We met with Ukrainians and Russians alike, sharing tea and borscht on a train from Kyiv to Lviv. And now, as we sit safely writing this letter in the U.S., those citizens across the map are fleeing their homes or picking up arms to fight for their lives. Here, our words fall short.

In war, one side may win, but humanity loses.

There’s no need for an introduction into what’s happening – all eyes are on Russia’s invasion of Ukraine. But to keep things on topic, let’s discuss its immediate impact on what you read this letter for – crypto.

Price Action

Following initial reports of Russia’s invasion on February 24th, BTC dropped from $37k to as low as $34k. But less than 24 hours later BTC regained its previous price and began to move up to its highest level in weeks. Most other crypto assets also followed a similar pattern. For example, ETH initially crashed on the news of the invasion but finished the day in the green.

Why The Jump?

Nobody knows exactly why crypto is up, but the current theory is that financial sanctions against Russia are driving awareness of the benefits of crypto. Furthermore, with many Ukrainian and Russian citizens unable to rely on their traditional banks, it’s safe to assume they are using crypto to preserve their savings. There’s some proof in the pudding, too. According to CoinMetrics, crypto exchange transaction volumes have surged for both the ruble and hryvnia.

A shift in macroeconomic expectations also likely played a partial role as the whole world watches these fear-driven events unfold. After all, there’s a reason why the demand for gold is increasing as well.

A Win For Crypto?

Now we won’t go as far as to say that anyone is winning. War is war. It’s never a good thing. What we can say, however, is that the recent decoupling from the S&P and the NASDAQ has so far strengthened BTCs use case as an attractive safe-haven asset, particularly in times of conflict.

Data from CoinMetrics shows when comparing the S&P 500 and BTC, the two hit their highest correlation on February 22 before taking a steep tumble through the week. Since then, BTC has enjoyed a ~20% rise. Conversely, traditional markets have not fared nearly as well.

Donations Are On The Rise

According to Decrypt, the Ukrainian government has so far received $20 million in BTC and ETH donations combined. Since the invasion, we’ve also seen a slew of fundraising in the form of DAOs, growth hacking techniques, and shared wallet addresses that go way beyond just BTC and ETH. Some even suggest that the global crypto community has funded Ukraine more than the United Nations.

Ukraine also set crypto Twitter abuzz with the promise of an airdrop, although no further details or information has been provided.

Going Forward

For what it’s worth, this is likely just the beginning. There’s no telling what happens next. Another unprecedented event could very well send crypto (and traditional) markets in a free fall. In the meantime, it’ll be interesting to keep tabs on crypto adoption, BTC fundamentals and its core use cases (the hedge from fiat), the power of community ethos, and the ongoing regulatory actions, particularly with exchanges.

A historic moment – a litmus test in many ways – for BTC and the greater crypto community is upon us.