Russia’s war against Ukraine is in its second week, and cryptocurrency has emerged as an important element of the conflict.
The war has sent 1.2 million Ukrainians fleeing since Feb. 24, and more than 2,000 Ukrainian civilians have been killed, according to the Ukrainian government. The human costs of the war are already steep, with no end in sight.
Those costs have inspired people across the world to help support Ukraine’s defense against Russia, and cryptocurrency has presented a novel way for them to do it. After the Ukrainian government tweeted a request for crypto donations, more than $50 million worth of crypto poured in. The Ukrainian government also announced plans to mint NFTs to fund its military. On the other side of the coin, there are growing concerns about Russia using crypto as a way to avoid sanctions, and the United States Treasury is concerned about Russian cyberattacks on crypto companies. Crypto scammers are also using Russia’s invasion of Ukraine to steal money from people looking to help.
The situation has brought even more volatility to the cryptocurrency market, and experts predict the ups and downs will continue. Cryptocurrency’s wider adoption and its recent alignment with the stock market make it even more linked with the international conflict. Bitcoin is hovering around $40,000 after dropping under $35,000 immediately following the attack, and Ethereum is back below $3,000. Either way, experts advise not to make financial decisions based on news-related panic.
“Your ability to stay disciplined and stay invested is ultimately what will lead to success or failure,” Douglas Boneparth, a certified financial planner and founder of Bone Fide Wealth, told NextAdvisor in recent days. Here are some more examples of how cryptocurrency is factoring into the fast-moving conflict:
- Crypto fraudsters are seizing the opportunity to take donations meant for struggling Ukrainians, according to research firm Elliptic as reported by The Wall Street Journal. A group pretending to represent the Ukrainian government reportedly solicited donations for the cryptocurrency Peaceful World, and the value rose to $50 million even after it was exposed as fraud. The crypto world is no stranger to scams, with $14 billion going to tricksters in 2021, according to blockchain researcher Chainalysis.
- An NFT of Ukraine’s flag brought in more than $6.7 million to help Ukrainians affected by Russia’s invasion. The effort was created by UkraineDAO, which is backed by a member of feminist punk band Pussy Riot. Vice Prime Minister of Ukraine and Minister of Digital Transformation of Ukraine Mykhailo Fedorov tweeted plans to issue the country’s own NFTs to support the country’s armed forces. Efforts to help Ukrainians affected by the attack have already brought in more than $50 million in crypto donations since the invasion.
- The United States Treasury department told cryptocurrency companies to stay vigilant about cybersecurity, with concerns that Russia could launch a cyberattack to retaliate against U.S. sanctions. As the crypto industry grows and therefore poses more risk, officials have been talking with trade groups and exchanges to ensure assets remain safe and protected.
Bitcoin is the largest cryptocurrency by market cap, and a good indicator of the crypto market in general, since other coins like Ethereum (and smaller altcoins) tend to follow its trends. Even though Bitcoin recently set another new all-time high, it was a pretty normal uptick for the crypto, which is notorious for its volatility. That’s not to say investors should take swings in either direction lightly, and this is also why investing experts recommend not making any major investment changes based on these normal fluctuations.
Cryptocurrency is still very new, and everything from innovation to regulation can have outsize impact for investors. Here’s how you can invest smartly, regardless of what’s making news or Bitcoin’s price swings.
How Investors Should Deal With Volatility
Cryptocurrency volatility is nothing new, and you should be comfortable with this if you decide to invest.
Volatility can be attributed to an “immature market,” says Ollie Leech, learn editor at Coindesk, a cryptocurrency news outlet. Anything from a celebrity tweet to new federal regulation can send prices spiraling.
“If Elon Musk puts hashtag Bitcoin in his Twitter bio, it sends Bitcoin up 10%,” says Leech.
This unpredictability is part of the reason why investing experts warn against investing huge amounts of your portfolio into a risky asset like crypto. Many recommend keeping your crypto holdings to less than 5% of your total portfolio.
For new investors, day-to-day swings can seem frightening. But if you’ve invested with a buy-and-hold strategy, dips are nothing to panic about, says Humphrey Yang the personal finance expert behind Humphrey Talks. Yang recommends a simple solution: don’t look at your investment.
“Don’t check on it. That’s the best thing you can do. If you let your emotions get too much into it then you might sell at the wrong time, make the wrong decision,” says Yang.
This is the traditional “set it and forget it” advice that many traditional long-term investors follow. If you can’t get on board, and the extreme dips continue to cause you worry, then you might have too much riding on your cryptocurrency investments.
“The most important thing any investor can do, whether they are investing in Bitcoin or stocks, is not just to have a plan in place, but to also have a plan they can stick with,” says Douglas Boneparth, a CFP and the president of Bone Fide Wealth. “While buying the dip might be attractive, especially with an asset that you really like, it might not always be the best idea at the moment.”
Top Crypto News From Recent Months
Cryptocurrency stars in Super Bowl ads
Cryptocurrency made a splash at the Super Bowl this year, with multiple cryptocurrency exchanges airing ads. The crypto ads captured America’s attention, but not everyone loved them. Senate Banking Chairman Sherrod Brown blasted them during a senate committee hearing last week, saying the ads lacked transparency and “left a few things out.” The hearing was another government meeting on stablecoins, where U.S. lawmakers echoed similar past sentiments about how more regulation is needed.
New York Stock Exchange wants to get in on NFTs
The New York Stock Exchange, the world’s largest stock exchange by market capitalization, wants to be the marketplace for NFTs just like with stocks. The exchange filed an application with the U.S. Patent and Trademark Office to provide an online marketplace for digital goods including NFTs, cryptocurrencies, digital media, and artwork. If the exchange’s plan comes to fruition, it would compete with other popular NFT marketplaces like OpenSea and Rarible.
Colorado will accept crypto for tax payments
Colorado Governor Jared Polis announced that the state will begin accepting crypto payments for taxes and other state-related transactions by the end of summer. Polis said during an interview with CoinDesk that Colorado will partner with crypto companies to effectively accept and convert Bitcoin into U.S. dollars. “We don’t want to take the speculative risk of holding crypto, so we will have a transactional layer there and it will be entered in our system as dollars,” he says. “For consumer convenience, we want to accept payment in a wide variety of cryptocurrencies, just as we do with credit cards.”
Proposed legislation weighs in on stablecoins
New Jersey Rep. Josh Gottheimer unveiled an early draft of legislation that would place clear definitions around U.S. dollar-backed stablecoins. The proposed legislation would designate certain stablecoins as “qualified,” making them redeemable on a one-to-one basis for U.S. dollars, and institute traditional deposit insurance on stablecoin holdings. The bill also states that qualified stablecoins would only be issued by banks or non-bank institutions that satisfy certain regulations.
JP Morgan enters the metaverse
JP Morgan has officially entered the metaverse, opening a lounge in Decentraland, a virtual world based on blockchain technology. The “Onyx lounge” was unveiled along with a report from the bank outlining “limitless” opportunities for businesses in the metaverse and why there is “explosive interest.” JP Morgan is the largest bank in the U.S. and the first to participate in the metaverse.
Coinbase partners with Mexico for withdrawals
Coinbase announced it’s launching a service that allows cryptocurrency recipients in Mexico to cash out their funds in pesos. The service will be offered at over 37,000 locations across the country, free of charge through March 31, after which customers will be charged a “nominal fee that’s still 25-50% cheaper” than traditional international payment options, according to a Coinbase blog post. Cryptocurrency has drawn interest for cross-border payments and money transfers, because of its potential as a faster and cheaper method to transact compared to more traditional options.
Meta scraps stablecoin project
Mark Zuckerberg’s plan to launch stablecoin project Diem has hit a dead end. Meta, formerly branded as Facebook, announced this week it sold its assets and intellectual property to crypto bank Silvergate Capital. The bank paid $182 million for the project, according to a press release. Though Meta is no longer involved in the project,…