Bitcoin rose nearly 18 percent on Monday, pushing the cryptocurrency close to $ 45,000 on Tuesday after the United States and its allies imposed new rounds of sanctions on Russia for invading its neighbor and after Ukraine raised millions of dollars in cryptocurrencies.
Bitcoin BTCUSD,
it last traded at around $ 44,203, up 2.7% in the last 24 hours, according to CoinDesk.
Why exactly bitcoin rally? Analysts have different views.
“Although the second stage of the move seems to have been at least partially fueled by a bit of a squeeze, the rally as a whole was caused by a huge jump in demand,” wrote Mikel Morch, CEO of ARK36 crypto hedge fund, in an email.
As the United States and its allies impose new sanctions on Russia’s central bank, some state-owned companies and elite families, there has been some speculation about whether Moscow can gain freedom of action through crypto.
Read: Can Russia use cryptocurrencies to evade Western sanctions? Probably to some extent, but it’s “very difficult to do on a scale,” says one analyst
Ukraine, meanwhile, has raised $ 31.7 million through more than 26,000 cryptocurrencies since Russia launched the invasion, according to cryptocurrency company Elliptic.
However, demand from Russia and Ukraine alone may not have been enough to push bitcoin to its current level on Monday, according to Bendick Norheim Shea, head of cryptocurrency research at Arcane Research.
“These markets have very small volumes compared to the common market,” Shay said.
Read more: As the ruble falls to less than a penny, Ukraine’s and Russia’s currency transactions for bitcoins and stablecoins are on the rise
Rance Mashek, president and founder of the iVest + trading platform, said he did not expect to see “huge price movements” from such transactions.
“I think you’ll see a lot more transactions, just cash flow,” Mashek said in an interview with MarketWatch. However, if cryptocurrencies are used to finance the war or to avoid sanctions, they are likely to be sold for other major currencies, such as the US dollar, he said.
According to Shay of Arcane Research, “what could drive the price is the story of an apolitical, unreliable warehouse of value that cannot be confiscated and is borderless.”
“This war can reinforce this story, and more people see value in these abilities,” Shay said.
Louis LaVal, managing director of crypto asset management company 3iQ Digital Assets, reiterated the idea. “The dollar is arming and it is very difficult to reverse the course”, as Western sanctions are aimed at restricting Russia’s access to financial markets and destroying the value of the USDRUB ruble,
“This puts the use of the bitcoin reserve currency in front and in the center,” LaVal told MarketWatch in an email.
“The built-in crowdfunding appeal is sometimes lost in the bitcoin story, but we do see it in action with tens of millions of cryptocurrency donations in support of Ukraine,” LaValle said.
Major US stock indexes ended sharply lower on Tuesday. Dow Jones Industrial Average DJIA,
fell 1.8% while the S&P 500 SPX
decreased by 1.6%, and Nasdaq Composite COMP,
decreased by 1.6%.