Bitcoin jumped 16% on Tuesday, continuing its sharp rebound as Russia’s assault on Ukraine continues and the United States tightens sanctions.
The cryptocurrency is up 6% in the past 24 hours to $44,219.50, according to Coin Metrics. The rally comes after cryptocurrency prices plunged last week as risky assets such as stocks sold off following Russia’s invasion of Ukraine.
Ether jumped 5.4% to $2,980.38. Earlier today, the crypto asset surged above $3,000.
Some analysts attributed the sharp rise to investors buying the dip, attempts by Russians to use crypto to evade sanctions, and Ukrainians and Russians trying to get their money out of their respective countries.
Crypto to evade sanctions?
Many have suggested that Russia could use bitcoin, which is not owned or issued by a single authority like a central bank, to evade sanctions. Veteran investor Mark Mobius said this could be one reason for bitcoin’s rise to prominence.
“I would say that’s why bitcoin has shown strength now — because Russians have a way to withdraw money, withdraw their wealth,” founding partner Mobius told CNBC on Tuesday. Mobius Capital Partners.
Bitcoin’s rally began after the United States imposed new sanctions on Russia over the weekend targeting its central bank, in addition to existing sanctions targeting oligarchs and Russia’s sovereign debt to keep the country apart. of the global financial system.
Leah Wald, CEO of Valkyrie Investments, said the idea that participants in Russian markets would use crypto to circumvent sanctions “is very likely but wrong because on-chain transactions are much easier to track than cash.” .
Michael Rinko, a partner at AscendEx, said it would be easier to censure the Russian government if it used bitcoin exclusively to manage its central bank reserves. This way, anyone could see all the money flowing in and out of bank accounts held by the central bank, due to the public nature of Bitcoin.
“At this point, it would be up to Europe and the US to pressure the biggest exchanges – Coinbase, FTX and Binance – to blacklist addresses associated with Russia, and no other major exchange would want to. interact with funds from those addresses,” Rinko said. “So they could freeze funds in bitcoins or other cryptos that touched a Russian account.”
Stablecoins as a safe haven
Since Thursday, when the Russian invasion began, transactions on centralized bitcoin exchanges for Russian ruble and Ukrainian hryvnia have hit their highest levels in months, according to Kaiko data.
Clara Medalie, research director at crypto data provider Kaiko, noted that ruble-denominated volume for stablecoin Tether is more than twice as much as bitcoin volume, which she says suggests that stablecoins could play a bigger role as a safe-haven asset or to circumvent sanctions.
“Most dollar-pegged stablecoins such as Tether or USDC are issued by centralized companies that could face sanctions, which could require them to monitor transactions,” she said. “There is precedent for centralized stablecoin issuers blacklisting certain addresses, so it will be interesting to see how the role of stablecoins evolves throughout the crisis.”
Rinko said the conflict in Ukraine was not the reason for the crypto’s outperformance in the market this week. Instead, investors are pricing in rate hikes from the Federal Reserve, he said.