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Bitcoin’s “Tug of War” During the Russia-Ukraine Crisis Sparks Debate About the Future

For a brief moment this month, cryptocurrency prices appeared to decouple from the volatility that was rocking Wall Street – but are once again dominated by risk aversion stemming from the Russia-Ukraine conflict.

For Bitcoin (BTC-USD), a debate has arisen about its use cases, such as: B. (legitimate) Ukrainian donations or (at best dodgy) flows from Russians wanting to avoid sanctions.

With the token hovering between $37,000 and $45,000 over the past month, many investors have called the present moment a test of the asset’s longer-term value. Bitcoin tracked stocks lower on Friday, slipping over 2% and down 6% in the last week alone.

According to Yuya Hasegawa, a cryptocurrency market analyst at Tokyo-based cryptocurrency exchange Bitbank, a battle between bulls and bears is playing out.

“A highly volatile asset like Bitcoin has been and continues to be affected by stock market volatility, but a tug-of-war between risk-off sentiment and inflation hedging will likely force Bitcoin to remain within the current medium-term range,” Hasegawa told Yahoo Finance.

Born in the wake of the financial crisis, Bitcoin was early promoted as an alternative payment network separate from the government monetary order. It has been dubbed “digital gold” by some of its more ardent supporters.

But since the pandemic began, the asset’s performance has largely been driven by staggering volatility and risk sensitivity – as opposed to a true safe haven.

It’s too early on the “adoption curve” for Bitcoin to truly be considered “digital gold,” said Martha Reyes, head of research at crypto exchange Bequant.

The token has sold 32% since its bull run a year ago, but for those who bought five years ago, the return delivered delivered 40x the original investment. Some still believe that Bitcoin’s future as an alternative form of transactions is bright.

“This is immense geopolitical pressure, the fact that Bitcoin is holding up makes me bullish on the asset over the long term,” Alex Chizhik, head of listings at crypto exchange Okcoin, told Yahoo Finance.

A role in a global crisis

Via social media, Ukraine has benefited from a flurry of crypto donation support. As of Friday, the country’s government and supporting organizations have received $63 million in vital data tracked by blockchain analytics firm Elliptic over the past 15 days.

As a complement to traditional forms of international support, crypto has proven useful as the country funds its defense, Alex Bornyakov, Ukraine’s deputy prime minister for digital transformation, told Yahoo Finance this week.

As Russia stormed Ukrainian cities, cryptocurrency proved a far easier form of money for non-Ukrainian volunteers who used digital coins as they moved in and out of the country. According to Ukrainian-born Illia Polosukhin, co-founder of crypto project Near Protocol, fleeing the war helped non-military citizens.

Much of the ethos behind cryptocurrency is to prevent “governance failures” from affecting money, he explained.

“We’re obviously not there yet, but the mission…is to create a more transparent and accountable system of government,” Polosukhin added.

In the meantime, the question arises as to whether sanctioned Russian individuals and organizations can use crypto to avoid criminal sanctions imposed by Western countries.

“It’s about Russian billionaires getting their money out of Russia,” Aleksandr “Sasha” Ivanov, a Dubai-based cryptocurrency investor and founder, told Yahoo Finance.

Ivanov claimed dual citizenship in Russia and Ukraine and launched his Waves project in Moscow. In the past, he said his team worked for a Russian state-owned company, but those ties were severed. Blockchain technology is about more than just money, he added.

Reuters recently reported that Russian crypto owners are trying to liquidate billions in the United Arab Emirates (UAE), which has no sanctions imposed on Russia. But US officials and some crypto experts have cast doubt on the idea.

Traditionally, the Russian elite has used places with lower sanctions compliance, such as Dubai, as safe havens for their financial assets, according to Jason Bartlett, a cybersecurity researcher with the Center for a New American Security (CNAS).

“Crypto is no different. It will likely take strong international political and economic pressure on the Gulf states to get regional authorities to crack down on Russian oligarchs who are buying real estate and hiding their wealth on their territories,” Bartlett added.

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