Conflict in Russia & Ukraine is helping define one of Bitcoin’s true uses — a non-sovereign store of value

Broadly, over the last 6 months, bitcoin exchange volumes on the spot markets have been treading water or marginally declining, averaging US$5bn a day on trusted exchanges and US$10bn a day on all exchanges. To give you an idea of scale, the London Stock Exchange trades roughly US$10bn a day. It has become a liquid, globally traded instrument that looks to be particularly attractive to those individuals who are in conflict zones or in economic mire.

We have written previously about Bitcoin’s fluid identity, and most recently it has been seen by many speculators incorrectly as a risk asset, often being compared to tech stocks. We believe this narrative misses some of the important fundamentals of Bitcoin, and is an easy conclusion to draw due to it being born from technological advancements in society.

Tech companies leverage advancements to offer goods and services. Bitcoin leverages advancements to provide an alternative monetary system, including a virtual currency that is limited in supply and transaction record resistant to government intervention.

Bitcoin uses the internet to connect and communicate between participants that have downloaded the Bitcoin software (protocol rules). It’s then these participants enforcing the software rules that give bitcoin its monetary properties that are free from politics and human error. This is quite different to a tech company and therefore, as it matures, the correlation should decline.

The protocol is not discriminatory, so anyone with access to the internet can setup a wallet that is the equivalent to an international bank account, being free from any regulation and human/political influence. It is correct that the on- and off-ramps, the exchanges that convert Bitcoin to fiat, can be subject to government influence but this doesn’t detract from its global portability. It enables, for the first time, the 1.7bn unbanked people of the world, access to an international bank account.

When times are desperate and where banks do not function correctly, it is often highly risky to transport physical cash. This is the case for many Ukrainians and Russians at present, consequently, crypto assets are seen as an attractive alternative. This has been a concept rarely tested until now, where we have seen Ukrainian crypto trading rise by 107% since the conflict began. Furthermore, the collapse of the Ruble and the increasingly dysfunctional banking system in Russia has prompted a 231% rise over the same period.

Combined, Russia and Ukraine have seen daily trading volumes rise to US$80m/day at times. This has predominantly been against the crypto pairs USDT and BUSD, commonly used US Dollar stable coins (crypto coins that are pegged to the US Dollar), but we have also seen significant amounts of Bitcoin and Ethereum used too.

We believe cryptocurrencies are being used as a hedge against falling domestic currencies and for their portability, particularly important for Ukrainian refugees, allowing them to cross borders without the risk of confiscation/theft of their assets.

Looking more broadly, we have seen a trend across geographies, where countries of high political instability tend to have higher growth in Bitcoin volumes.

Russia and Ukraine are good examples of this, but it can be seen in other politically unstable countries such as Nigeria, Turkey, Brazil and Mexico. Interestingly, Canada has seen significant growth in Bitcoin volumes recently, we believe this is a direct result of Justin Trudeau’s misguided policies that limited protesters’ access to their bank accounts.

While Bitcoin’s identity remains fluid, as it matures we are likely to see one of its core original concepts, a stateless asset that is free from human error and politics, continue to gain ground against its identity as a risk asset. This has been aptly demonstrated by recent geopolitical events.

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