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Crypto: Has the Russia-Ukraine war driven up bitcoin’s price? Here’s what analysts are saying

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Bitcoin has gained almost 18% since Monday, pushing the cryptocurrency near $45,000 on Tuesday, after U.S. and its allies levied new rounds of sanctions against Russia for invading its neighbor and as Ukraine has raised millions of dollars in crypto donations.

Bitcoin
BTCUSD,
+1.50%

was last trading at around $44,203, up 2.7% over the past 24 hours, according to CoinDesk data.

Why, exactly, is bitcoin rallying? Analysts hold different views. 

“While it seems that the second leg of the move was at least partially fueled by a small short-squeeze, overall, the rally was driven by a huge spike in demand,” Mikkel Morch, executive director at crypto hedge fund ARK36, wrote in an email. 

As U.S. and its allies levy new sanctions targeting Russia’s central bank, some state-owned companies and elite families, there has been some speculation around whether Moscow could gain leeway through crypto.

Read: Can Russia use cryptocurrencies to evade Western sanctions? Likely, to some extent, but it’s ‘very hard to do at scale,’ says one analyst

Meanwhile, Ukraine has raised $31.7 million through more than 26,000 crypto donations since Russia launched the invasion, according to crypto compliance company Elliptic.

However, demand from Russia and Ukraine alone may not have been enough to push bitcoin to its current level since Monday, according to Bendik Norheim Schei, head of research at crypto firm Arcane Research. 

“These markets have very small volumes compared to the total market,” Schei said. 

Read more:As the ruble plunges to less than a penny, dealings surge in Ukraine and Russia currency for bitcoin and stablecoins

Rance Masheck, president and founder of trading platform iVest+, said he doesn’t expect to see “tremendous price movements” from such transactions. 

“I do think you’ll see a lot more transactions, just movement of money,” Masheck told MarketWatch in an interview. However, if the cryptocurrencies are being used to fund the war or to evade sanctions, it’s likely that they will be sold for other major currencies, such as U.S. dollars, he said.

According to Schei at Arcane Research, “what could be driving the price is the narrative of an apolitical, trustless store of value that can’t be confiscated and is borderless.”

“This war may strengthen that narrative, and more people see value in these capabilities,” Schei said.

Louis LaValle, managing director at crypto asset-management company 3iQ Digital Assets, echoed the point. “The dollar is being weaponized, and it’s very tough to reverse course,” as Western sanctions aim to limit Russia’s access to financial markets and destroy the value of ruble
USDRUB,
-0.89%
.

“That puts the bitcoin reserve currency use-case front and center,” LaValle told to MarketWatch in an email. 

“The embedded crowdfunded appeal sometimes gets lost in the bitcoin narrative, but we’re really seeing it in action with tens of millions of cryptocurrency donations supporting Ukraine,” LaValle said. 

Major U.S. stock indexes ended sharply lower Tuesday. The Dow Jones Industrial Average
DJIA,
-1.76%

fell 1.8%, while the S&P 500
SPX,
-1.55%

 slumped 1.6% and the Nasdaq Composite
COMP,
-1.59%

 dropped 1.6%.

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