- The recent boom in Bitcoin prices has come in part as a result of Russians buying it up en masse
- Russian banks are close to collapse and the ruble is crashing in value
- This isn’t the first time residents of a country have turned to Bitcoin in trying times
Much has been made in the mainstream media of Russians buying up bitcoin to avoid the collapse in value of their fiat currency system. Long queues have been forming as sanction-hit banks neared collapse following sanctions from European nations, with account holders desperate to take out their holdings before the crash comes. Bitcoin, meanwhile, has seen a 15% pump at the same time. This is not a coincidence, but nor is it the first time that Bitcoin has been used for this purpose – in 2013, Bitcoin boomed when a similar event hit the Mediterranean island of Cyprus.
Cypriot Government Froze Citizens’ Money
In 2013, Bitcoin was known only as the preserve of speculators and buyers of illicit contraband, but in March of that year its true use case got an airing. The tiny European island of Cyprus was gripped by a financial crisis brought on by the financial crash of 2008, which resulted in the Cypriot government having to raise $7.5 billion, which they decided to do by taxing bank deposits – taking a slice off the top of all money deposited into Cypriot banks by their customers, up to 10%.
Knowing the backlash this would provoke, the government enforced withdrawal restrictions to avoid potential bank runs, leading to headlines across the globe and to residents looking for alternatives to cash when they were finally allowed access to their money again.
Bitcoin to the Rescue
It didn’t take long before Bitcoin grabbed their attention, although the restrictions, plus the difficulty of buying bitcoin at the time, meant that they would have to wait until the restrictions were lifted before they could buy. A bailout loan was agreed in later March, meaning that deposits would no longer be taxed. This didn’t appease bank customers however, who, when the withdrawal restrictions were lifted, flocked to Bitcoin nonetheless.
As a result of this influx, and helped by the ensuing news coverage, Bitcoin took off, flirting with $50 for a week in early March before passing through and taking out the psychological $100 barrier just five days after the bailout was announced. Bitcoin peaked at $230 eight days later, marking a 4.6x price increase over a month.
The Cyprus incident led Bitcoin to finally be seen as it was intended – a place of refuge for those whose trust in governments and the traditional financial system has evaporated. The Russia-Ukraine conflict is not the first time Bitcoin has been used in this way, and it won’t be the last.
