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Russia & Ukraine Conflict

Following on from our brief further BTC, market and recent news update, we thought we’d provide members with a more in-depth read of the current state of affairs between Russia and Ukraine. This is increasingly important given its impending and current effect on the cryptocurrency market.


How did this begin?


To understand the true roots of the Russian – Ukraine conflict, it actually goes back to the early 90s when the Soviet Union dissolved, allowing Ukraine, a former Soviet republic, to stand alone with the third largest atomic arsenal on the planet. Both Russia and The US had to work alongside Ukraine in ensuring the nation was denuclearised. In doing so, Ukraine had to give back hundreds of nuclear warheads to Russia in exchange for assurances of security that protected it from any Russian attack. 


The true conflict actually stemmed from early 2014, in which Russia put the above assurances to the test, invading Ukraine. In doing so, Russia annexed the Crimean Peninsula, backing a rebellion led by Pro-Russian separatists in the eastern Donbas region. This was in response to widespread protests throughout Ukraine that ended up toppling the nation’s pro-Russian President, Viktor Yanukovych. As a result, over 14,000 people have died.


People worldwide were unimpressed that post-Soviet Europe was becoming destabilised. A lack of diplomatic response in Europe by not providing Ukrainians immediately with offensive weapons, led a lot of people to be appalled with the idea that Russia, holding nuclear weapons, was seemingly exempt from strong measures by the international community. 


Fast forward to October of 2021, Russia then began moving troops and military means once again to the border with Ukraine, reigniting fears over a potential invasion. This seemingly surrounds Putin’s obsession with reclaiming some of the Russian empire that was lost with the fall of the Soviet Union. He has been quoted as saying that Ukrainians and Russians “were one people – a single whole”. 


This then extends to Putin’s concerns surrounding the prospect of Ukraine joining NATO. Ukraine has put themselves in a shocking position, informally joining NATO without a formal decision in place, as it is unlikely all 30 member countries of NATO would accept Ukraine’s membership, mainly as it doesn’t meet the needed conditions on democracy and rule of law. Irrespective, their informal application for an alliance with NATO has irritated their neighbours next door, all the whilst formally not having NATO protection in place. A very dangerous game to play. 


Russia’s Deputy Foreign Minister Sergei Ryabkov has stated “for us it’s absolutely mandatory to ensure Ukraine never, ever becomes a member of NATO”. Its other demands include that NATO not deploy “strike weapons near Russia’s borders”, and that all forces and military infrastructure is removed from member states that joined the alliance from 1997.


Russia’s President Vladimir Putin attends a session of the annual Valdai Discussion Club in Sochi, Russia October 21, 2021. Sputnik/Maksim Blinov/Kremlin via REUTERS


What is happening right now?


What is happening as of right now is very much an extension of 2014. Russia’s foreign ministry has issued a set of demands, including a ban on Ukraine entering NATO.


In response, NATO allies rejected these demands and warned Putin and Russia of serious retaliation if Ukraine was to be invaded. These sanctions included assistance to Ukraine (such as defensive weaponry and small arms), as well as associated economic sanctions placed on Russia.


Recently, multiple avenues of intelligence have suggested irrespective of impending sanctions and provisional support provided to Ukraine from NATO allies, that Russia intends to launch an invasion that will encircle the Ukrainian capital, Kyiv. 


Currently the US government estimates that there are between 169,000 and 190,000 Russian soldiers stationed along the Ukrainian border, in both Russia and the neighbouring Belarus. 


A number of government officials from around the globe have been quick to voice their concerns over what’s to come. UK Prime Minister Borris Johnson has stated in an interview with the BBC that “all the signs are that the plan has already in some senses begun…. People need to understand the sheer cost in human life that could entail”. He went on to warn us further that if Putin was to engage in further conflict that he would be “thinking illogically about this… I think it’s vital for us all now to get over what a catastrophe it would be for Russia”. The fact that Johnson is even comparing the conflict to as devastating as World War II should be raising some eyebrows. 


Currently, the US and UK are still holding out hope for a diplomatic resolution, despite the provision of money and weapons to Ukraine (as well as military presence in Eastern Europe) and preparing sanctions against Russia. The Biden administration has put a lot of effort into working with NATO, the European Union, and individual European partners to counter Putin. 


The conflict in Ukraine seemingly only risks further deterioration of Russian-US relations. This is only enhanced if Russia then expands its forces into Ukraine or other NATO countries. Such concerns and heightened tensions only complicates so many other prospects and areas of international relations and the global economy.


Its impact on cryptocurrency?


As noted in our news update yesterday, the main thing overshadowing not only the cryptocurrency markets, but all other financial markets globally, is the impending Russia-Ukraine war which is sapping all risk appetite. As tensions have continued to rise, Bitcoin and cryptocurrency prices have subsequently crashed.


Bitcoin on the 18th of February fell over 10%, crashing towards $40k, with Ethereum, XRP, Solana and Cardano seeing similar declines, with over $200 billion being wiped from the market. 


What’s clear is that the impending war adds a lot of selling pressure (as high as 15-20%) on BTC and the associated financial markets, due to fears of economic collapse as a result of sanctions in place and broken down international relations. It adds pressure on all high-risk assets and investments. This has always been the case in immediate response. 


Head of Research at Coinbase Institutional, David Duong, said “crypto performance in the last week shows us that there’s very little room for complacency regarding any of the major themes impacting this market… Open conflict could potentially affect Bitcoin hashrates, which could exacerbate the knee-jerk market reaction weaker for high-beta risk assets like crypto”. 


Today, as of writing, as tensions are continuing to escalate, selling pressure has continued with BTC down to $37k (5.08% for the day, 13.2% for the week) and ETH as low as $2,577 (4.85% for the day, 11.94% for the week). 



As the prospect of war remains real in Ukraine, it is important for all of us to maintain an eye on the geopolitical events as they unfold as they have real consequences on all of us. 


Today’s article was simply a recap of what’s occurring & why, and its associated impact on the cryptocurrency markets as it stands. Stay tuned for further updates!

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