Russians turn to Bitcoin to escape plummeting ruble currency

As the West level economic sanctions thick and fast on Russia, the ruble currency has been sent into freefall, plummeting 20% Monday to a record low against the dollar.

Via XE.com

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In a startling move bound to increase fear of ruble-holders, Russia’s central bank more than doubled interest rates from 9.5% to 20%, with very real fears of a run on the banks in play. The stock and derivatives markets in Russia are also staying shut today, while the Central Bank is releasing 733 billion rubles ($8.78 billion) in local bank reserves to boost liquidity. Pictures circulating on social media Monday morning showed long lines at ATMs, as people queued with the hope of withdrawing cash to exchange for goods before the currency market opened, fearing hyperinflation.

In short, it’s a currency crisis.

Bitcoin, of course, is meant to be built for such situations. A currency based on code and math, it’s a trustless asset outside of the control of governments and theoretically, therefore, immune to the hyperinflationary/debasement fears currently rippling through the streets of Russia. So what’s happening right now makes for a fascinating case study.

The data doesn’t disappoint. Bitcoin/ruble trading hit a 9 month high this morning, as ruble holders flipped their trust from Putin to the blockchain. The trading volume initially picked up on Thursday, reaching a lofty 1.5 billion rubles, with citizens fearing greater sanctions and further ruble weakening.

Bitcoin/ruble trading volume via Kaiko

It highlights Bitcoin’s unique place in the investment space, providing an escape route in times of mass hysteria. Citizens of countries with volatile heads of states (not naming names) and corrupt regimes (or just plain old economic incompetence in general) now have the crypto option to store wealth, should their trust in fiat diminish. Greece, Cyprus, Venezuela can all attest to how quickly the panic amid a currency crisis can spread. Of course, crypto comes with its own volatility, but for a short-term escape route it offers ruble holders a refuge.

With Putin even ordering that brokers ban non-residents from selling securities, it’s very much code red in Russia. The much-discussed SWIFT ban from the West has been escalated, while the EU has also placed a ban on transactions with the Russian Central Bank in order to block Russia’s intended sale of offshore assets.

“We will paralyse the assets of Russia’s central bank” EU Commission President Ursula von der Leyen said in a statement Sunday. “This will freeze its transactions. And it will make it impossible for the Central Bank to liquidate its assets”. This amounts to quite the step given Russia’s large kitty of foreign reserves.  They have amassed $630 billion, which can be used in times such as these to help quell the fallout from sanctions and the absence of export revenue. However, if the EU can succeed in essentially freezing these funds, Russia’s hands are tied.

Amid all these questions, it’s not surprising to see a plummeting ruble, ATM queues and crypto volumes spike, as people do whatever is necessary to protect their wealth and flee the ruble.