When making investment decisions, it’s vital to rely on your own judgment rather than being overly influenced by the actions of other investors. However, it can be beneficial to pay attention to the movements of large investors or investor groups, especially when they are investing heavily in volatile assets like Bitcoin(BTC 3.80%) and Ethereum(ETH 4.89%).
Impact of Geopolitical Factors on Crypto Markets
Both Bitcoin and Ethereum have a global presence, as they are purchased, held, and exchanged by individuals and businesses across many nations, sometimes despite legal restrictions. While many cryptocurrency exchanges operate legally within strict regulatory frameworks, they can still be exploited for purposes such as circumventing international sanctions or money laundering.
In Russia, where a significant amount of oil is produced and sold, the oil trade was valued at $192 billion in 2024, primarily conducted in rubles. However, international sanctions related to the Ukraine conflict have complicated trade, making direct transactions in rubles or other local currencies challenging.
According to reports from Reuters in mid-March, Russian oil companies are increasingly turning to Bitcoin, Ethereum, and other cryptocurrencies to navigate these financial restrictions and continue their transactions.
For example, a company in India may purchase oil from a Russian supplier by first making a payment in rupees to an intermediary, who then converts the rupees into Bitcoin or Ethereum. This step avoids violating sanctions, allowing seamless transfer of cryptocurrency to the Russian seller, who then liquidates it for rubles, effectively bypassing the sanctions.
Potential Dangers and Dynamics at Play
The evolving legal status of cryptocurrency in Russia is noteworthy, with a recent pilot program allowing wealthy investors to engage in cryptocurrency trading. This shift could impact how Russian companies continue to use Bitcoin and Ethereum amidst ongoing sanctions.
Investors should be cautious and not base their entire investment strategy on the current trend of evasion, as the duration of these sanctions is uncertain. This could lead to sudden changes, resulting in price drops or increased volatility. It’s essential to recognize the intrinsic qualities of Bitcoin, especially its independence from government control, which plays into its value proposition in such scenarios.
Unlike Bitcoin, the influence of evasion on Ethereum may not be as strong or enduring. While there could be temporary price increases due to demands from sanction-evading entities, the ethical positioning of the Ethereum Foundation may prompt changes that limit its use for illicit activities. Therefore, those contemplating investments driven by this evasion dynamic may find the potential benefits short-lived and followed by a significant downturn. Thus, exercising caution is recommended.
