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ETFS 21Shares Crypto Monitor - 3rd March 2022


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Executive Summary

Despite the war waging between Russia and Ukraine, February saw an honorable struggle towards recovery, with Bitcoin’s increasing by 8.3% since last month and Ether by 10.4%. In this report, we’ll delve deeper into the geopolitical impact on not just the price performance of crypto-assets but also the adoption of the wider blockchain technology. February has also been a busy month for DeFi in the US, with crypto lending protocols hanging at the edge of their seats after BlockFi was fined $100M. This monthly review will discuss the developments in this space as well as the attacks and arrests that happened on the back of crypto heists that occurred years ago and whose culprits are just being unveiled. We will conclude our report by listing down the multinational brands that have announced their eagerness to tap into the NFT industry and the larger metaverse.

Geopolitics and Adoption

Russia and Ukraine are at war and have triggered a refugee crisis. In these distressing times, we want to highlight the humanitarian consequences. Over 400 have been killed from the Ukrainian side, and at least 500 from the Russian, since the invasion on February 24. It comes by no surprise that the ongoing conflict crashed the markets – cryptocurrencies and stock futures included – with the exception of Oil which surged by over 30%. Russia is Europe’s main supplier of gas and it also exports metals as well as wheat, along with Ukraine. The world stands in fear of what this conflict in correlation with these facts can mean to the global economy which is already struggling with inflation and a supply-chain crisis.

Following the invasion, the Russian ruble dropped by almost 30% and equity providers are deeming the country’s stock market “uninvestable” and are considering – if not already in effect – removing Russian listings from their indexes altogether. Moreover, the EU, US, and their allies have agreed to cut off a number of Russian banks from the main international payment system, SWIFT; a system Russia heavily relies on for its oil and gas exports.

Similarly, the EU will freeze the assets of President Vladimir Putin of Russia and his foreign minister, Sergey Lavrov — while President of the EU Commission, Ursula von der Leyen, proposed to paralyze the assets of Russia's central bank. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed expansive economic measures, in partnership with allies and partners, that target the core infrastructure of the Russian financial system. Nonetheless, this measure does not hold immediate effect, deemed controversial by many Americans, as there is a 30-day period.

Comparison Between the % Increase | 22-28 February 2022


Sources: Yahoo Finance, CoinGecko

In addition, while the Russians hoarded at the border of Ukraine before the invasion, they made way for a crypto-native use case beyond payments. A crypto project that now has almost 9M files uploaded to document the ongoing crisis. Describing itself as a global, permanent hard drive built on the blockchain, Arweave is a decentralized storage protocol designed to provide scalable and permanent on-chain data storage in a sustainable manner. This use case shows how important crypto-native cloud storage will be especially in light of geopolitical conflicts and tyrannical regimes who have a habit of rewriting history around their agendas.

Moreover, a javascript tool has been developed to fetch news from a variety of sources on the Russo-Ukrainian conflict and to automatically upload them on Arweave’s growing archive. At 21Shares, our thesis has been that the use cases of blockchain technology and Web 3 tools materialize especially in the wake of geopolitical conflicts. We have laid out our thesis on Arweave in the fifth issue of our State of Crypto, of which you can get a copy here.

The silver lining is the unprecedented worldwide financial support from people to the Ukrainian government received through crypto payments, mainly Bitcoin and Ether. In the same vein, RELI3F, a web3 initiative launched to provide global humanitarian aid. According to Elliptic, the Ukrainian government – and NGOs providing support to the military, have raised $24.6 million through more than 26,000 crypto-asset donations since the start of the Russian invasion. However, there were some random NFTs, which could be viruses, sent to the ETH address. Important to make sure the Ukrainian government doesn’t touch them. Large amounts raised like those become honey pots, especially in the context of this cyberwar.

Cryptoassets Donated to the Ukrainian Government and NGOs