Russia has not anticipated the crippling impact on its economy from the sweeping sanctions imposed by Western countries and their allies, with the Kremlin unable to use cryptocurrencies to circumvent the economic retributions for its invasion of Ukraine.
“I do not think that Russia, being a pro-crypto to a certain point now, was a foreshadow of what they were expecting in terms of sanctions,” Mr. Ten, a co-founder of decentralized finance (DeFi) platform Ten Finance, said.
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Days before invading Ukraine, the Russian finance ministry submitted a proposal to the country’s central bank to legalize the issuance and circulation of cryptocurrency. Some sectors saw this as a prelude to the attack and a means to go around upcoming economic sanctions.
Indeed, if there is one sovereign that can turn to digital currencies during a crisis in Ukraine, which is “doing more daily transaction volume in cryptocurrencies than its own currency,” added Mr. Ten.
“So this tells you a lot about the state of crypto and the direction we’re going. Although right now, at a time where they are being attacked, this is the last thing on their mind,” he went on to say.
In addition, the Ten Finance executive described the market as in a “consolidation zone where nobody really knows how to react to what’s happening and to what extent they should start worrying.”
He went on to say, “The fact we have inflation fears and FOMC (Federal Open Market Committee) rate hikes looming makes the situation that much more complicated.
His views were shared by RippleNet general manager Asheesh Birla who earlier dismissed speculations Russia would use cryptocurrencies to evade the sanctions, saying there isn’t enough global liquidity to support Russia’s needs.
Crypto markets still need to mature
Mr. Ten expressed confidence that the crypto markets will take the lead from equity and commodity markets initially, as they have been performing in recent times. Which could allow the crypto market to start decoupling itself from traditional markets.
“Although I think it might be a bit too soon,” he said and added it would take some time before we see a global mass adoption of cryptocurrency transactions, as the majority of cryptocurrency holders still live day-to-day using fiat currency.
Even during times of economic or geopolitical turmoil, the natural reaction of traditional markets is to exit the crypto market and hold on to their cash.
“Even with the adoption we’ve had over this last bull run we had, people are still fragile when it comes to this. As much as we want to remove ourselves ’emotionally’ from the markets, certain situations do not allow for such.”
“But I think in due time, the crypto markets will decouple from traditional markets. Bitcoin will decouple first, then all other cryptos/DeFi solutions will then decouple from Bitcoin itself, thus creating an ecosystem that is reliant on the fundamentals of said markets rather than what traditional market participants anticipate and do,” Mr. Ten added.
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