People turning to crypto during Russia-Ukraine war

The use of cryptocurrencies changes significantly at wartime, new research from Vienna University of Economics and Business (WU) finds.

During the Russia–Ukraine conflict restrictions were imposed on banking services. As conventional financial networks and institutions were disrupted, people turned to crypto. WU researchers Jorao Gomes Jr., Verena Dorner and Davor Svetinovich took a closer look at how user behaviour changed, together with colleagues from Brazil.

By examining all Bitcoin and Ethereum transactions that occurred two weeks before and after the onset of the Russian invasion of Ukraine, the researchers built a picture of cryptocurrency use during a period of acute instability.

The study found that the wartime use of Bitcoin and Ethereum differed. While Bitcoin appeared to offer a safer haven for users aiming to protect their savings, Ethereum’s network showcased higher activity levels among a concentrated user base.

Bitcoin users showed signs of caution leading up to the Russian invasion, with transactions declining during the pre-conflict phase, suggesting users were safeguarding their assets. However, once the conflict escalated, Bitcoin usage surged as users began transferring funds.

In contrast, Ethereum’s user base remained consistent throughout, with a smaller group of highly active accounts continuing their transactions at a higher frequency.

“Our research uncovers clear shifts in blockchain user behaviour during geopolitical conflicts, highlighting distinct reactions on Ethereum and Bitcoin. These insights may be key to forecasting crypto market dynamics in response to global events,” says Jorão Gomes Jr, MSc.

The study shows that people turned to crypto as a viable alternative financial system during wartime, to store, send, and receive money. The findings emphasize that cryptocurrency markets, while still in their infancy, react to geopolitical events.

The study shows that crypto can be a potential alternative to traditional financial networks in the face of future global disruptions.

The study was published in the Journal IEEE Transactions on Computational Social Systems.