What happened
It's been a wild and wacky day in the crypto world. As of Tuesday morning, most cryptocurrencies were up for the trailing 24-hour period, with top tokens Bitcoin (BTC -1.07%), Ethereum (ETH -1.66%), and Dogecoin (DOGE -2.67%) each surging at some points by double-digit percentages. While those tokens have given up some of their gains, as of 11:15 a.m. ET, Bitcoin, Ether, and Dogecoin were still higher by 7%, 5.1%, and 3.8%, respectively, over the prior 24 hours.
Much of this has to do with news that cryptocurrencies are facilitating a surge in capital out of Russia. Data released Monday highlights impressive surges in trading pairs, with volumes in the Bitcoin-ruble trading pair spiking in incredible fashion. Investors appear to be taking the view that Russians and Russian institutions may make significantly more use of mega-cap cryptocurrencies as their nation's financial system reels from sanctions.
Image source: Getty Images.
Additionally, Ether has been noted as the leading cryptocurrency of choice for those looking to donate to Ukraine's defense efforts. More than $6 million has been added to Ukraine's Ethereum wallet, with $4.2 million in Bitcoin also finding its way to the Eastern European nation. In total, more than $20 million in donations has been reported thus far.
However, on Monday, the U.S. Treasury announced formal crypto rules aimed at curbing the use of cryptocurrencies as a means of evading Russian sanctions.
So what
There's a lot to unpack here. As decentralized currencies, digital tokens have traditionally been viewed as an efficient means for users to transfer money anonymously and across borders. However, given the nature of the sanctions imposed on Russia, the utility of these cryptocurrencies and the networks that underlie them is more obvious than ever.
There has also been a lot of discussion lately about the relatively high correlations between the price movements of cryptocurrencies and equity markets. Many have abandoned the notion that Bitcoin and its peers can act as market hedges in times of volatility. That said, when it comes to geopolitical uncertainties and financial system risk, perhaps there's something to be said for holding investments in this sector.
Now what
It will be interesting to see what effect the new crypto rules the U.S. Treasury is imposing on crypto exchanges will have. These regulations, aimed at making it difficult for Russian oligarchs and entities to move money overseas via cryptocurrencies, certainly make sense. How enforceable they are, however, remains to be seen.
For now, the crypto market has another catalyst for bulls to latch on to. Let's see whether this is the beginning of another prolonged upward run, or if the bearish trend this market has experienced in recent months will soon re-emerge.
