Bitcoin back above US$40,000 as Russians switch to cryptocurrencies.
Prices of cryptocurrencies, such as bitcoin, are rising after the Russian ruble plunged to another record low and Moscow received new sanctions. As of 5:25 a.m. ET Tuesday, bitcoin had increased 13% in the past 24 hours to a price of US$43,163, according to cryptocurrency tracker CoinDesk. Other cryptocurrencies also rose in price. Ethereum rose 10% on Tuesday to US$2,878. Dogecoin, meanwhile, rose 6% to about 13 cents each.
Not only bitcoin is gaining interest.
Traditionally, virtual currencies are often considered a risky bet. But as conventional assets experience restrictions or increased volatility due to geopolitical tensions, some analysts believe they will gain more traction. According to Arcane Research, an Oslo-based cryptocurrency research firm, the trading volume between the ruble and cryptocurrencies has soared in recent days on Binance, one of the world's largest cryptocurrency exchange venues. Investors seem to be "trying to get out of the ruble" due to its "drastic devaluation after all the sanctions," said Bendik Schei, head of research at Arcane.
Schei added that more people were switching to tether instead of bitcoin. Although bitcoin is the world's most valuable cryptocurrency, it is known as a "stable coin" because it is pegged to the U.S. dollar. "This is where they find the most comfort right now," Schei said of investors. "In the current market conditions, I'm not surprised to see investors, at least in Russia, looking for stable currencies...it's about saving their funds, not investing," he completed. Over the past week, the rope has been broadly stable, around US$1 each.
The ruble continues to plummet.
The moves came as the ruble plunged on Monday, trading at 104 to the U.S. dollar. And little changed in the early hours of Tuesday morning. Western powers froze the assets of Russia's central bank in a bid to make it harder for Russia to mitigate the effect of sanctions on some of its biggest lenders and other companies. The steps aim to prevent Russia from accessing a "rainy day fund," which officials said Moscow had hoped to rely on during the invasion of Ukraine. Instead of using reserves to cushion the ruble's fall, Russia will no longer be able to access many of the funds it holds in U.S. dollars. In addition to offering investors a relatively haven, cryptocurrencies could provide Russians with a way to evade sanctions, according to some experts. U.S. and European Union sanctions rely heavily on banks to enforce them. Suppose a sanctioned company or individual wants to conduct a transaction denominated in traditional currencies such as dollars or euros. In that case, it is the bank's responsibility to flag and blocks those transactions. But digital currencies operate outside the realm of standard global banking, with transactions recorded in a public ledger known as the blockchain.