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Bitcoin (BTC) is playing a very important role in the ongoing war between Russia and Ukraine, and residents of these two nations have taken to the digital currency to complete most offshore transactions.
Drawing on this unique role, Bloomberg’s Senior Commodity Strategist, Mike McGlone, believes the Russia-Ukraine conflict “may mark another step in # Bitcoin’s maturation toward becoming the global digital collateral.”
Bitcoin has long been tagged as a currency that can play the role of a legal tender by many of the coin’s proponents. Critics and regulators have often rebuffed the clamour level with respect to this. However, the dependence on Bitcoin and other digital currencies over this past week as showcased these nascent asset class has a role to play in the future of finance.
That Bitcoin operates decentralised makes it ideal for bypassing the ongoing slew of financial sanctions being imposed on the Russian banks for the country’s attack on Ukraine, with a spillover effect on the citizens. With Bitcoin, donors can easily send money to Ukrainian-government-controlled accounts, a gesture they have done well in the past week, while families in the diaspora can send money to their loved ones back home.
The potential role of Bitcoin as global digital collateral is also being influenced by its response to monetary policies from Central Banks around the world. The price and valuation of the digital currency have often been erratic in the past six months as the United States Federal Reserve has been contemplating increasing the interest rate in response to rising inflation.
Bitcoin has often thrived from inflation as investors tend to invest in it as a potential high-yielding hedge comparable to gold. With the plans to hike the rates, the inherent attractiveness of the digital currency is billed to be tapered down. It might slow the eventual push of the cryptocurrency as a potential global digital collateral.
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