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The Ukraine crisis is not a factor driving the crypto market

The political and humanitarian crises in Europe precipitated by Russia’s invasion of Ukraine resulted in a major exodus from both nations. Crypto has become the sole practical option for many migrants and refugees to take their savings with them. However, data shows that this hasn’t resulted in a significant increase in the crypto market.

Crystal Blockchain, a blockchain analytics firm, looked at the hot wallets of major cryptocurrency exchanges that work with the Russian ruble and Ukrainian hryvnia, as well as peer-to-peer marketplaces like LocalBitcoins and Paxful, and found no significant fluctuations related to the war and migration. It’s vital to recall that soon after the war began, many worldwide exchanges that used to support ruble trading pairs imposed their own sanctions against Russian users. Binance, for example, has stopped accepting payments made with Russian bank cards, CEX.io has prohibited deposits and withdrawals for users from Russia and Belarus (a wartime ally of Russia), and CoinZoom has halted the registration of new Russian accounts.

Alameda Research found that “Russian and Ukrainian trade volumes [were] surging” in early March. However, Crystal points out that there hasn’t been a noticeable increase in on-chain activity, and that transaction activity has been steadily declining across a range of cryptocurrency exchanges over the past six months, with fund flows falling even further after the outbreak of the Ukraine conflict. Daily ruble trade volume soared immediately after Russia’s invasion of Ukraine, “growing over 900 percent to over $70 million between February 19 and 24, the highest it’s been since May 2021,” according to Chainalysis. However, activity has since been declining, with periodic spikes, the firm wrote in a blog post.

Chainlaysis also noticed a significant increase in activity for “Russian whales,” or crypto wallets with big holdings ascribed to Russian users. During March, those wallets transmitted over $62 million in bitcoin to other addresses, most of which were affiliated with over-the-counter (OTC) desks and exchanges, according to Chainalysis. However, it’s difficult to say what this could indicate or whether the spending was tied to sanctions evasion, according to the firm.

Outside and inside Russia’s borders, the Russian invasion of Ukraine sparked a crisis. While Ukrainians flee their wrecked homes for Poland and other European nations, Russians are fleeing punishment for their anti-war stance, since the Russian government imposed strict censorship, making any public discussion about the conflict that differs from the official line illegal.

According to some estimates, 200,000 Russians have fled their homes in the last month, including independent journalists, political activists, artists, IT workers, and others who oppose the conflict and Russia’s strong anti-Ukrainian propaganda. Many of them wound themselves in Georgia, Armenia, Turkey, and other countries where visas are not required. However, they were subjected to a different form of persecution in Russia: Visa (V) and Mastercard (MA) halted operations in the country, leaving Russian bank debit cards unusable overseas; payment providers such as Western Union, Wise, Remitly, and MoneyGram followed suit.

At the same time, Russian citizens are prohibited from crossing the border with more than $10,000 in foreign money in cash. In addition, on March 9, Russia imposed a six-month ban on foreign currency trade. This combination of internal and international financial censorship highlights crypto as a significant financial tool for the new wave of Russian immigrants, making it one of the few remaining options for them to take their savings overseas and send money back home.