What happened
The value of cryptocurrencies soared across the board starting late on Monday and into Tuesday as world events once again moved markets. Russia’s invasion of Ukraine has caused ripples in all markets, but there’s a reason investors are pouring into cryptocurrencies today.
As of 2:30 p.m. ET, in the past 24 hours, Shiba Inu ( SHIB 4.49% ) had jumped as much as 12.4%, Polkadot ( DOT -0.90% ) popped as much as 10.1%, Cardano ( ADA -0.95% ) was up 7.6%, and XRP ( XRP 0.10% ) rose 6%. The market has been up sharply in the past few days, and this was one of the biggest moves yet.
Image source: Getty Images.
So what
The U.S. and Europe have sanctioned Russia, which continues to escalate its invasion of Ukraine. That includes cutting off Russia’s access to SWIFT, which is a global financial messaging system that moves billions of dollars per day through 11,000 banks.
If Russia can’t access the world’s banking system, how will it make financial transactions? One answer could be cryptocurrencies. We already know that Russian citizens hold $24 billion of Bitcoin, and they could pour into other crypto assets.
One of the major arguments for cryptocurrencies has been that they’re decentralized and largely immune from the actions of central banks and regulations. That can be used for good or bad, depending on how you look at the situation. Today, we’re seeing that cryptocurrencies may be one of the few ways Russian citizens and the government itself will be able to move assets around the world.
Now what
There are multiple layers involving cryptocurrencies to the Russian invasion. Ukraine has raised at least $22 million for its own defense through cryptocurrency donations, which can be made quickly and anonymously around the world. Cryptocurrencies have also been used by Russian and Ukrainian citizens who are trying to make financial transactions, and banks aren’t working properly. But we could also see nefarious actors using the cryptocurrency, so there’s bad with the good for cryptocurrencies right now.
As much attention as this bump in cryptocurrencies has gotten, I’m not sure how long it will last. Speculators are betting that desperate people will use crypto to move money around, but the speculative trade may not last.
That said, I do think this is showing one of the best use cases for cryptocurrency as a decentralized form of digital currency. No matter where you are in the world, these assets can be moved at a moment’s notice, which can’t be said for money sitting in banks right now. That alone could help drive the value of cryptocurrencies over the next year, especially if this conflict lasts for a while.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.