Analysts at CNBC believe that the Russia-Ukraine conflict has thrust crypto into the spotlight. Many investors shifted their attention to digital assets from fiat money in such turbulent times. Notably, many states are concerned that Russia may use cryptocurrencies to circumvent Western sanctions.
This issue has been widely discussed in the media since the introduction of sanctions against Russia. Crypto experts highlight several difficulties. The main ones are the inability to track blockchain transactions and the lack of liquidity.
Earlier, the Russian ruble crashed following sanctions imposed by the EU and the US. For this reason, many investors sought shelter in virtual currencies to evade the restrictions as well as mitigate their negative effects. Crypto assets like bitcoin are decentralized, which means they are not controlled by an entity like a central bank. Nevertheless, there are some pitfalls. Blockchain, the technology that underpins bitcoin, is a public ledger of activity. Therefore, it is possible to track the movements of funds from one account to another quite easily. As a result, it is not the best tool for avoiding sanctions.
"The biggest misconception about crypto remains that it is untraceable and is primarily used for nefarious purposes, which couldn’t be further from the truth," Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said.
Other features of bitcoin as digital gold, namely a store of value and a safe haven asset came in handy in times of turmoil. However, analysts do not recommend pinning hopes on BTC due to its high volatility.
At the same time, after the outburst of military conflict, Ukraine began accepting donations in cryptocurrencies to finance its army. According to Elliptic, an analytical company, it managed to raise over $50 million in crypto.
It is difficult for bitcoin to become a safe haven asset due to high volatility. Besides, cryptocurrencies may face a new sell-off after the Fed's statements about an earlier-than-expected rate increase. The main cons of digital assets are high fees and low transaction speeds.
