Bitcoin Demand Booms in Ukraine And Russia
The cryptocurrency has been trading at a premium against the Ukrainian hryvnia.
3 min
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The Russian invasion of Ukraine has driven demand for cryptocurrencies in both countries, helping boost the price of bitcoin.
Bitcoin has been trading at a premium against the Ukrainian hryvnia on a number of exchanges, both globally and locally, a sign of high demand. On Binance, the largest exchange in the world, bitcoin was trading for the equivalent of $47,300 in hryvnia terms. On Kuna, the largest exchange in Ukraine, it was at US$46,955, and had traded as high as US$51,240.
In U.S. markets, bitcoin was recently trading at US$43,895, up about 15% since Monday morning, according to data from CoinDesk.
On Binance, there has been a surge in trading volume of bitcoin in exchange for rubles since just before Russia’s invasion began. Between Feb. 20 and 28, about 1,792 bitcoins exchanged hands in the ruble/bitcoin trading pair, compared with only 522 in the nine days before that, according to data on Binance.
Western sanctions have effectively cut Russia off from the global financial network, and Ukraine has imposed strict capital controls.
Crypto is popular in Ukraine and Russia. Ukraine ranked fourth on a global adoption index created by analytics firm Chainalysis. A Russian government report estimates that there were more than 12 million cryptocurrency wallets held by Russian citizens with about 2 trillion rubles, equivalent to about $20 billion.
“The situation in Ukraine has brought to light the value of bitcoin as an alternative monetary network,” said Timo Lehes, the co-founder of trading platform Swarm Markets.
A demand-driven rally specific to bitcoin is a break from its recent pattern, which has been to trade in line with risk assets like tech stocks.
Bitcoin’s rally this week wiped away losses for February. Most other cryptocurrencies were higher as well. Ether was up 8.1%. XRP was up 4.9%. Avalanche was up 9.7% and Cardano was up 7%.
On Tuesday, the tech heavy Nasdaq Composite Index fell 1.2%.
Because bitcoin trades 24-hours a day, in some cases it has been leading risk assets, not just following.
Last Wednesday, when Russian President Vladimir Putin announced his invasion of Ukraine, U.S. equities markets were closed. Bitcoin fell about 6% overnight, then rallied 13%. On Thursday, U.S. stocks closed slightly higher after a day of wild trading.
Bitcoin dropped almost 9% from the afternoon of Friday, Feb. 18, through the evening of Monday, Feb. 21, amid news of the worsening crisis in Ukraine. U.S. stock markets, closed on Monday for a holiday, didn’t get a chance to react to the news until Tuesday. When they did, the major indexes all lost more than 1%.
Attention has also fallen on cryptocurrencies for their potential to be an outlet for Russians trying to get around sanctions. While cryptocurrencies themselves haven’t been part of the sanctions, the White House has been considering adding them.
On Twitter on Sunday morning, Mykhailo Fedorov, Ukraine’s vice prime minister requested cryptocurrency exchanges block Russian accounts. “It’s crucial to freeze not only the addresses linked to Russian and Belarusian politicians, but also to sabotage ordinary users.”
Ukraine’s Mr. Fedorov didn’t make clear if the request was personal or one on behalf of the government. An attempt to reach him wasn’t successful.
Crypto exchanges largely demurred from enacting any voluntary restrictions in Russia.
Binance said it would not be doing a blanket ban but that it was taking action against those sanctioned by Western countries. Exchanges Coinbase, Kraken and KuCoin also said they wouldn’t be freezing Russian accounts without sanctions or legal requirements to do so.
“We try our best to protect human rights and asset security,” said KuCoin’s Chief Executive Johnny Lyu. “Actions that increase the tension to impact the rights of innocent people should not be encouraged.”
Crypto exchanges regularly comply with court orders and legal requests for data on its users, the same as regulated banks. There was no hint that the Ukrainian government, either alone or in concert, was going to take legal steps to require blocking Russian users.
On the technical side, exchanges have improved their infrastructure over the past several years and would be able to implement these sanctions if required, said Jack McDonald, the chief executive of PolySign, which makes crypto-assets storage software for exchanges and other custodians.
The exchanges have the ability to monitor accounts and transactions, and even know where the deposits are coming from. Funds from known hacks, for example, can and are blacklisted.
“It’s going to prove to be hard for Russia to evade sanctions using bitcoin,” Mr. McDonald said.
Even so, blocked users would still be able to find unregulated exchanges or even more opaque marketplaces for buying and selling their cryptocurrencies.
Part of Western sanctions included cutting Russia off from the Swift network, a bank-owned consortium that handles millions of daily payment instructions.
Western sanctions and restrictions are “bolstering the argument for blockchain products that will compete with the SWIFT network,” said Oanda analyst Edward Moya.
Investors are buying now, he said, in anticipation of an investment wave predicated on building those products.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: March 2, 2022.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Investors are taming impulsive money moves by adding a little friction to financial transactions
4 min
To break the day-trading habit that cost him friendships and sleep, crypto fund manager Thomas Meenink first tried meditation and cycling. They proved no substitute for the high he got scrolling through investing forums, he said.
Instead, he took a digital breath. He installed software that imposed a 20-second delay whenever he tried to open CoinStats or Coinbase.
Twenty seconds might not seem like much, but feels excruciating in smartphone time, he said. As a result, he checks his accounts 60% less.
“I have to consciously make an effort to go look at stuff that I actually want to know instead of scrolling through feeds and endless conversations about stuff that is actually not very useful,” he said.
More people are adding friction to curb all types of impulsive behaviour. App-limiting services such as One Sec and Opal were originally designed to help users cut back on social-media scrolling.
Now, they are being put to personal-finance use by individuals and some banking and investing platforms. On One Sec, the number of customers using the app to add a delay to trading or banking apps more than quintupled between 2021 and 2022. Opal says roughly 5% of its 100,000 active users rely on the app to help spend less time on finance apps, and 22% use it to block shopping apps such as Amazon.com Inc.
Economic researchers and psychologists say introducing friction into more apps can help people act in their own best interests. Whether we are trading or scrolling social media, the impulsive, automatic decision-making parts of our brains tend to win out over our more measured critical thinking when we use our smartphones, said Ankit Kalda, a finance professor at Indiana University who has studied the impact of mobile trading apps on investor behaviour.
His 2021 study tracked the behaviour of investors on different platforms over seven years and found that experienced day traders made more frequent, riskier bets and generated worse returns when using a smartphone than when using a desktop trading tool.
Most financial-technology innovation over the past decade focused on reducing the friction of moving money around to enable faster and more seamless transactions. Apps such as Venmo made it easier to pay the babysitter or split a bill with friends, and digital brokerages such as Robinhood streamlined mobile trading of stocks and crypto.
These innovations often lead customers to trade or buy more to the benefit of investing and finance platforms. But now, some customers are finding ways to slow the process. Meanwhile, some companies are experimenting with ways to create speed bumps to protect users from their own worst instincts.
When investing app Stash launched retirement accounts for customers in 2017, its customer-service representatives were flooded with calls from panicked customers who moved quickly to open up IRAs without understanding there would be penalties for early withdrawals. Stash funded the accounts in milliseconds once a customer opted in, said co-founder Ed Robinson.
So to reduce the number of IRAs funded on impulse, the company added a fake loading page with additional education screens to extend the product’s onboarding process to about 20 seconds. The change led to lower call-centre volume and a higher rate of customers deciding to keep the accounts funded.
“It’s still relatively quick,” Mr. Robinson said, but those extra steps “allow your brain to catch up.”
Some big financial decisions such as applying for a mortgage or saving for retirement can benefit from these speed bumps, according to ReD Associates, a consulting firm that specialises in using anthropological research to inform design of financial products and other services. More companies are starting to realise they can actually improve customer experiences by slowing things down, said Mikkel Krenchel, a partner at the firm.
“This idea of looking for sustainable behaviour, as opposed to just maximal behaviour is probably the mind-set that firms will try to adopt,” he said.
Slowing down processing times can help build trust, said Chianoo Adrian, a managing director at Teachers Insurance and Annuity Association of America. When the money manager launched its online retirement checkup tool last year, customers were initially unsettled by how fast the website estimated their projected lifetime incomes.
“We got some feedback during our testing that individuals would say ‘Well, how did you know that already? Are you sure you took in all my responses?’ ” she said. The company found that the delay increased credibility with customers, she added.
For others, a delay might not be enough to break undesirable habits.
More people have been seeking treatment for day-trading addictions in recent years, said Lin Sternlicht, co-founder of Family Addiction Specialist, who has seen an increase in cases since the start of the pandemic.
“By the time individuals seek out professional help they are usually experiencing a crisis, and there is often pressure to seek help from a loved one,” she said.
She recommends people who believe they might have a day-trading problem unsubscribe from notifications and emails from related companies and change the color scheme on the trading apps to grayscale, which has been found to make devices less addictive. In extreme cases, people might want to consider deleting apps entirely.
For Perjan Duro, an app developer in Berlin, a 20-second delay wasn’t enough. A few months after he installed One Sec, he went a step further and deleted the app for his retirement account.
“If you don’t have it on your phone, [that] helps you avoid that bad decision,” he said.
