Home » Russia Can’t Rely On Crypto As Shield From Crippling Sanctions, Analysts Say

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

by Admin

Using crypto as 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.

Many believe that Russia will continue to bombard the country with missiles and bombs.

But, nope.

Bitcoin, as it turns out, has just breached the $40,000 mark while Russia’s currency sank to a record low and Moscow was hit with new economic sanctions.

See Related Article| Criminal Whales Hold $25 Billion In Crypto Assets: Chainalysis Report

The latest CoinMarketCap data shows that Bitcoin has risen 14% to $43,163 in the past 24 hours, a new record since February 20, according to CoinMarketCap.

The value of other cryptocurrencies rose as well. Ethereum reached 10% on Tuesday Dogecoin increased to around 6%, at $2878

Terra and Solana saw significant price increases. Terra rose 9.5% while Solana soared by almost 8%.

Explosions and Sanctions

After Russia’s invasion of Ukraine on February 24, Bitcoin’s value sank together with other crypto.

On the second day of the occupation the market for crypto fell to $1.6 trillion. This is roughly 5%. Bitcoin plummeted by $2,000 to $35,000 an hour after war broke out.

Other than the cryptocurrency industry, stocks markets took some damage during the current crisis. With the Dow Jones Industrial Average falling by 1.4%

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

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

“This is where they find the most comfort at the moment. Under the current market conditions, I’m not surprised to see investors, at least those in Russia, seeking stablecoins… this is about saving their funds, not investing,” Schei added.

 Source:| Source: TradingView.com

Great Rubble Collapse

With the diplomatic tensions unfolding, western countries have frozen the assets of Russia’s central bank to make it harder for the country to counter the sanctions’ effects on their economy.

Economists are referring to the “rainy day fund,” which Moscow authorities had admitted to be its safety net for its invasion of Ukraine. 

Russia wants to make contact with banks willing to help them, as the US and European nations directly use foreign banks to enforce sanctions. 

Russia cannot access US dollar funds and is not able to depend on currency reserves.

On Monday, Russia’s economy was already in free fall. The ruble dropped to record levels, while the benchmark rate at the central bank was increased to 20% and the stock market remained closed.

It’s not enough to have Crypto Shield

According to cryptocurrency specialists, Russia’s situation is different, with the country having less room to maneuver because of the magnitude of the economic damage and its limited use of digital currencies.

Russia, unlike other countries, has long been an active participant in international financial and economic markets. 

Nearly 80% of foreign currency transactions in Russia involve US dollars.

According to cryptocurrency experts, Russia won’t be able avoid the sanctions that would have been imposed on it invading Ukraine. This is based solely upon cryptocurrencies.

See Related Article| Bitcoin Staggers After Putin’s Nuclear Deterrence Alert Warning

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

US Treasury currently restricts flow of Russian foreign currencies worth $640 million.

“It is very difficult to move massive amounts of crypto and convert it to usable currency,” Ari Redbord of TRM Labs, a blockchain intelligence firm, said.

For Russia to be able to extricate itself from the misery of the West’s sanctions, it must do more than just turn to cryptocurrencies and believe it is where it will be safe.

Featured image taken from Business Today. Chart by TradingView.com

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