Bitcoin kept advancing on Tuesday, briefly trading above $44,000 for the first time since February 17 amid mounting signs that the war in Ukraine is bolstering demand for cryptocurrencies.
The largest cryptocurrency rose as much as 6 per cent to $44,183 and traded at $43,400, gaining along with other major digital tokens. Equities benchmarks across Asia were also mostly up, with Japan's Topix index rising 1 per cent.
Bitcoin's outperformance over the past few days of intensifying combat in Ukraine and escalating sanctions on Russia has some bulls pointing to a break from the narrative that crypto is just another risk asset.
Adam Farthing, chief risk officer for Japan at crypto trading firm B2C2, said Bitcoin could "de-link from risk" and start trading more like a hedge to geopolitical instability and inflation.
Bitcoin's outperforms over the past few days
"Bitcoin can benefit from some of the instability which will likely befall the dollar and euro" as a result of worsening international tensions, said Louis Curran, managing partner at Gigabyte Investment, in a LinkedIn post on Tuesday.
While still elevated at 0.55, Bitcoin's correlation with the S&P 500 has come off after surpassing 0.7 earlier this year, data compiled by Bloomberg show. A correlation of 1 means two assets move perfectly in tandem, while a zero correlation displays their fluctuations are wholly independent.
"We note a few indications that Bitcoin may be at - or near to - a turning point," B2C2's Farthing said in a note. "The fact that put skew is not trading near the recent highs indicates the market may be starting to worry about being underinvested in Bitcoin," he wrote, referring to the relationship between the price of bullish and bearish options on the digital token.
Bitcoin appears to be gaining traction in Russia and Ukraine's local currencies amid heavy fighting and sweeping sanctions that have pushed the Russian ruble to a record low.
Bitcoin volumes using ruble, hryvnia surge
Trading volumes in Bitcoin using the ruble have surged to the highest level since May, while those based in Ukraine's hryvnia have climbed to a level not seen since October, according to crypto data firm Kaiko.
"The trend follows a wave of sanctions against Russia, which has disrupted forex markets and caused the ruble to sink to record lows against the dollar," said Clara Medalie, head of Kaiko research.
The uncertainty of the Moscow-led invasion of Ukraine and its capital has cast a pall over global markets and a flight to safe-haven assets.
The view of Bitcoin as a 'digital gold' has waned in recent months as the correlation between the world's largest cryptocurrency and the US stock market has grown stronger. But it's still true - exemplified by a Bitcoin boom fueled by Turkey's lira crisis - that some tend to prefer Bitcoin during unpredictable times.
Bitcoin's 'digital gold' prospect brightens
Bitcoin's overall trading volume also picked up during last week's price swings, but the increased activity for BTC/UAH and BTC/RUB trading pairs was "magnitudes greater" than the BTC/USD pair, Medalie said.
Volumes in Bitcoin crypto exchanges that trade the RUB/USD pair saw volumes rise by 121 per cent week-on-week, according to CoinShares data.
It's not clear whether the increased volume indicates more "buy" interest from the two countries. However, Medalie said the divergence from other fiat pairs including the dollar and euro over the past five days implies Bitcoin could be more attractive in those two markets.
As signs show that more Russians are potentially moving their money into crypto, Ukraine officials urged exchanges to block addresses of Russian clients.
Russians move their money into crypto
Binance - which saw the most ruble-Bitcoin trades on its exchange - confirmed it would block Russian accounts targeted by sanctions, but that it would not "unilaterally freeze" millions of user accounts in the country.
"Crypto is meant to provide greater financial freedom for people across the globe. To unilaterally decide to ban people's access to their crypto would fly in the face of the reason why crypto exists," a Binance spokesperson told Bloomberg.
"However, we are taking the steps necessary to ensure we take action against those that have had sanctions levied against them while minimizing impact to innocent users."