Investors are buying Bitcoin and other cryptocurrencies in anticipation that Russians will switch to digital currencies to avoid the effect of Western sanctions imposed in response to the invasion of Ukraine.

Sanctions include freezing Russia’s cash reserves. The ruble has sunk to record lows against the dollar, with 1 ruble currently worth $0.0094. The Russian central bank has raised interest rates to 20 percent in a bid to counter hyperinflationary pressures.

Trading volumes between the ruble and Bitcoin increased to a nine-month high, according to a CoinDesk report.

The price of Bitcoin rose to as much as $44,000 in the last week before retracing its gain to trade at $38,794.11 as of this writing.

Other cryptocurrencies, including Ethereum and Dogecoin, also moved higher before clawing back on their gains.

Virtual currencies are traditionally seen as a risky bet, but as conventional assets experience curbs or greater volatility because of geopolitical tensions, some analysts believe they will gain more traction.

The trading volume between the ruble and cryptocurrencies has spiked in recent days on Binance, one of the world’s biggest cryptocurrency exchanges, according to Oslo-based cryptocurrency research firm Arcane Research.

Data from blockchain research firm Arcane Research shared with Motherboard shows that USDT/RUB (Tether/Russian ruble) trading volume on Monday broke a new record with $34.94 million.

Monday's trading volume was 519% above average for this year. https://t.co/felvHDJfG0 pic.twitter.com/vEt6cMn0Ct

— Motherboard (@motherboard) March 1, 2022

Media outlet DeFiprime.com reported that Russians were paying up to $20,000 above market rate to buy Bitcoin on Russian exchanges.

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Citigroup analyst Alexander Saunders said while last week’s price uptick could be linked to increased investor activity in the crypto markets, there was “relatively small” volumes from Russians.

“Russian volumes have been relatively small so far, suggesting that the price action is more due to investors positioning for an expected uptick in demand from Russia, rather than Russian demand itself.”

Citi on the Bitcoin rally and its connection to Russia:

"Russian volumes have been relatively small so far, suggesting that the price action is more due to investors positioning for an expected uptick in demand from Russia, rather than Russian demand itself."

— Joe Weisenthal (@TheStalwart) March 2, 2022

Authorities in Russia have continued working to establish a comprehensive legal framework for crypto transactions. The efforts, which started before the military invasion of Ukraine, go on amid warnings that Moscow may use cryptocurrencies to evade expanding financial sanctions.

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