- While some have touted crypto as one way for Russia to circumvent sanctions, others say that idea is "misguided."
- Ruble-denominated volume for the stablecoin Tether is more than twice as high as bitcoin volume, according to Kaiko.
Bitcoin jumped as much as 16% on Tuesday, continuing its sharp rebound as the Russian assault on Ukraine continues and the U.S. ratchets up sanctions.
The cryptocurrency was last up 6% in the previous 24 hours to $44,219.50, according to Coin Metrics. That rally comes after cryptocurrency prices plunged last week as risk assets such as stocks sold off following Russia's invasion of Ukraine.
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Ether jumped 5.4% to $2,980.38. Earlier in the day the crypto asset rose above $3,000.
Some analysts have attributed the big surge to investors buying the dip, Russians' attempts to use crypto to evade sanctions and Ukrainians and Russians trying to get their money out of their respective countries.
Crypto to evade sanctions?
Many have suggested Russia could use bitcoin, which is not owned or issued by a single authority like a central bank, to evade sanctions. Veteran investor Mark Mobius said that could be one reason behind bitcoin's rise.
"I would say that's the reason why bitcoin has shown strength now — because the Russians have a way of getting money out, getting their wealth out," Mobius, founding partner of Mobius Capital Partners, told CNBC on Tuesday.
Bitcoin's rally began after the U.S. imposed further sanctions on Russia over the weekend targeting its central bank, on top of existing sanctions aimed at oligarchs and Russia's sovereign debt to sever the country from the global financial system.
Leah Wald, Valkyrie Investments CEO, said the idea that Russian markets participants would use crypto to get around sanctions "is highly likely but misguided, since it is far easier to track on-chain transactions than cash."
Michael Rinko, venture associate at AscendEx, said it would be easier to censor the Russian government if it used bitcoin exclusively to manage its central bank reserves. That way, anyone could see all monetary flows into and out of the bank accounts owned by the central bank, due to Bitcoin's public nature.
"At that point it would depend on Europe and the U.S. to pressure the biggest exchanges — Coinbase, FTX and Binance — to blacklist the addresses associated with Russia, and then no other major exchange would want to interact with funds that originated from those addresses," Rinko said. "So they'd be able to freeze bitcoin funds or other crypto that touched a Russian account."
Stablecoins as a safe haven
Since Thursday, when the invasion by Russia began, transactions on centralized bitcoin exchanges in both the Russian ruble and the Ukrainian hryvnia surged to their highest levels in months, according to Kaiko data.
Clara Medalie, research director at crypto data provider Kaiko, noted that ruble-denominated volume for the stablecoin Tether is more than twice as high as bitcoin volume, which she said suggests stablecoins could play a more important role as a safe haven asset or in circumventing sanctions.
"Most dollar-pegged stablecoins such as Tether or USDC are issued by centralized companies that could be targeted by sanctions, which could force them to monitor transactions," she said. "There is precedent to cenralized stablecoin issuers 'blacklisting' certain addresses, so it will be interesting to see how the role of stablecoins evolves throughout the crisis."
Rinko said the conflict in Ukraine isn't the reason for crypto's outperformance in the market this week. Instead, investors are pricing out Federal Reserve rate hikes, he said.