Bitcoin has Finally Found a Use Case: Ukraine

The War currency

I never did believe Bitcoin was a good hedge against inflation or a valid digital gold, but let’s give it to Web3, Ukrainian central bank have suspended electronic cash transfers, bolstering the use case for crypto.

Geopolitical tensions and climbing inflation are among the key factors weighing down on bitcoin’s price. It’s basically proving Bitcoin a poor hedge against inflation as it correlates more with the NASDAQ now.

However the Ukraine situation bears some watching. Bitcoin donations to the Ukrainian army are soaring after Moscow launched a large-scale offensive against Ukraine early Thursday.

New data from blockchain analytics firm Elliptic shows that over a 12-hour window, nearly $400,000 in bitcoin was donated to Come Back Alive, a Ukrainian NGO providing support to Ukraine’s armed forces.

War is not so good for Bitcoin Apparently

Ukraine is an interesting case in point. For years, volunteer groups have played a critical role in the Russia-Ukraine conflict. These organizations have augmented the work of Ukraine’s military by offering additional resources and manpower. When Ukraine’s pro-Russian president Viktor Yanukovych was ousted in 2014, for example, legions of organized volunteers stepped up to support protesters.

However, let’s be honest. Bitcoin’s choppy week amid Russia’s Ukraine invasion shows the cryptocurrency might not be the safe haven backers believe it to be. Bitcoin is likely due for another crypto winter if Coinbase’s guidance is anything to go by. Bitcoin slumped to a one-month low on Thursday after Russian forces fired missiles at several cities in Ukraine and landed troops on its coast, sparking a sell-off of riskier assets.

Kuna, a popular Ukrainian crypto exchange, shows that Ukrainian buyers are paying a premium for tether’s USDT stablecoin, which is pegged to the price of the U.S. dollar.

Crypto as an International Funding Currency?

Activists have deployed Bitcoin crypto for a variety of purposes, including equipping the Ukrainian army with military equipment, medical supplies and drones, as well as funding the development of a facial recognition app that identifies if someone is a Russian mercenary or spy.

“Cryptocurrency is particularly suited to international fundraising because it doesn’t respect national boundaries and it’s censorship-resistant — there is no central authority that can block transactions, for example in response to sanctions,” said Tom Robinson, Elliptic’s chief scientist.

“Cryptocurrency is increasingly being used to crowdfund war, with the tacit approval of governments,” said Robinson of Elliptic, which sells blockchain analytics tools to banks and some of the world’s largest cryptocurrency platforms, including Binance and Circle.

So with Ukraine, crypto crowdfunding seems to be the most effective. Bitcoin is no longer an underdog, but Ukraine sure is this week.

The fresh round of crypto donations capitalizes on a trend seen in recent weeks, in which donations totaling hundreds of thousands of dollars have flooded into Ukrainian NGOs and volunteer groups working to stave off a Russian offensive, according to Elliptic.

Bitcoin’s First Mandate? Borderless and censorship-proof

The Ukrainian Cyber Alliance, has received close to $100,000 in bitcoin, litecoin, ether and a mix of stablecoins over the last year. Since 2016, Alliance activists have engaged in cyberattacks against Russian targets, says Elliptic.

Even as Western leaders have frozen “freedom convoys” donations and even freezing bank accounts, that’s harder to do with crypto.

Ukraine has also taken steps to embrace cryptocurrencies at a national level.

Ukrainian President Volodymyr Zelenskyy and the parliament recently reached common ground on a law that legalizes and regulates cryptocurrency. The former comedian seems popular globally even has his country is being tarnished by the brutal hands of Russia.

One such group, Come Back Alive, which began accepting cryptocurrency in 2018, provides the military with equipment, training services and medical supplies. It also funded the development of a drone-based reconnaissance and targeting system for Ukrainian artillery units.

The price of bitcoin fell to a two-week low Tuesday after Russian President Vladimir Putin ordered troops into Donetsk and Luhansk, two breakaway regions in eastern Ukraine, shortly after declaring them as independent.

Bitcoin invented in 2009 and that has been a major way for the financial elite to grow their wealth without regulation, has struggled to find a purpose outside of being a commodity for speculation. Ukraine donations might be changing that, at least to some absurdly small degree.

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