Last week, in the blink of an eye, war had returned to Europe, and the world was left scrambling to figure out what’s next. As the fighting continues in Ukraine, there has been a largely united Western response in the form of economic sanctions. Russian banks have been cut off from SWIFT, the assets of Putin and other key leaders have been frozen, and the reserve assets of Russia’s central bank have been targeted, leaving the country more economically isolated than ever before.
When it comes to crypto’s role in the conflict, there have been two distinctly different narratives. Some politicians – notably Senator Elizabeth Warren in the US and ECB President Christine Lagarde – have raised the specter of crypto being used by Russia to evade sanctions. The US Treasury, however, has notably been less concerned, considering crypto too small in scale to offer a truly viable alternative to Russia’s beleaguered leadership.
On the other hand, regular citizens have used crypto to lend their support for the Ukrainian effort in a dramatic way. Over the weekend, the official Ukrainian Twitter account posted links with BTC, ERC-20, and DOT addresses. More than 99,000 donations worth more than $47,700,000 subsequently came to the addresses, according to Elliptic. Someone even donated a CryptoPunk!
We at Nexo also joined the fundraising effort with an initial $100,000 and offered all our users the option to send fee-free donations in crypto to these official addresses. Join us and we’ll match your contribution.
War shows off some of the worst that humans have to offer. But in the darkness, it can also bring out the best. It has shown just how strong our crypto community is and what the true economic power of crypto is. We don’t know what will happen next with Ukraine. But we’re proud that tens of thousands of crypto users have said “I can’t do much to ease human suffering, but I can do this.”
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The Macro Fallout
Western businesses came under immense pressure to cut ties with Russia: Apple Pay and Google Pay stopped working in much of the country, BP announced it would divest its 20% stake in Rosneft, while Exxon and Shell left Russian entanglements. The ruble has cratered in value and while Russia has refused to open its stock market, their stocks listed in London have lost 90% of their value. Russia for its part has bit back, blocking foreigners from selling Russian equities, launching counter-sanctions, and restricting how much cash is allowed to leave the country.
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Crypto markets roared back to life this week. After initially falling on the news of the invasion, many cryptos began the week up double-digit percentages. Bitcoin moved from a low between $34,000-$35,000 at the end of last week to a range between $43,000 and $45,000 for most of this week. People offered many explanations. Some pointed to market structure and a short squeeze. Others looked at increased volumes of trade denominated in rubles (Russia) and hryvnia (Ukraine). Others thought it was something more fundamental and narrative-driven - the accession of the censorship resistance narrative of Bitcoin and cryptocurrency. Nic Carter put it well.
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While the geopolitical discussion has dominated crypto discourse in 2022, the institutional adoption narrative that was so important in 2020 and 2021 continues to hum in the background. This week, that was on display in a few ways:
Citadel’s Ken Griffin said that he had been wrong about crypto and that the company was going to move into the space as a market maker.
KPMG Canada purchased a World of Women NFT – a move they said would help them better support their clients as they figure out their “corporate NFT strategies.”
Supply chain and logistics startup Flexport revealed that they had Bitcoin on their “fortress-like” balance sheet.
There were several high-profile moves from TradFi executives into the crypto space, including Provenance Blockchain’s new CEO.
The Week’s Most Interesting Data Story
The Uptick in Crypto Usage in Ukraine and Russia
As the Bitcoin price started to surge, some wondered whether it was due to Ukrainian and Russian demand. Ukrainians looking to store their wealth in a more portable, hard-to-cease money; Russians looking to keep their money working for them as they got disconnected from the existing global system.
While most argue that the volumes involved are too low to account for the price jump we saw at the beginning of the week, there’s no denying that trading in hryvnia- and ruble-denominated pairs has jumped significantly. At the end of the day, what’s driving price matters less than the fact that people who feel like they don’t have any other option are turning to crypto.
What the Community Is Discussing
An argument that the fiat system helps enable war.
Why it’s unlikely Russia will be able to use crypto to evade sanctions.
A great explanation of the censorship resistance value of Bitcoin from Nexo’s Antoni.