Amid political upheavals, financial markets often mirror the events. The attempted coup by the Wagner Group in Russia recently underscores this point. As the crisis deepened, the volume of trade between the Russian ruble and Tether, a top dollar-pegged stablecoin, saw a sharp spike.
Wagner Threat Triggers Rush to Stablecoins
Led by Yevgeny Prigozhin, the Wagner Group sought to challenge the firm grip of President Vladimir Putin over Russia. This audacious attempt was the first in the past three decades. While the coup didn’t succeed, it sent shockwaves through the financial markets. It led to increased activity in the trade between the Russian ruble and the stablecoin Tether.
The day Prigozhin’s militia made its move, June 24, marked an unexpected boom in the trading volumes of Tether and the ruble. Data from CCData revealed a jump from a daily trading volume of $3.9 million to an astounding $14.7 million. This surge, an increase of 277%, reflected the nervousness in the market. However, when Prigozhin called off his forces following Putin’s intervention, trading volumes slipped below $3 million the very next day.
During this tumultuous period, Russians withdrew a staggering $1 billion from local banks, as reported by the Russian central bank. Concurrently, the ruble saw a third of its value wiped out, reaching a nadir not seen since the beginning of the Ukraine conflict, initiated by Putin.
The Appeal of Dollar-Pegged Cryptocurrencies
In economies grappling with instability and facing severe sanctions, cryptocurrencies pegged to the dollar, such as Tether, provide an alternative financial refuge. Tether and other stablecoins allow traders to transition their assets between the volatile crypto market and a more stable value pegged to the US dollar.
The identity of those benefiting from these trades is currently unknown. However, former chief of the Commodity Futures Trading Commission, Charley Cooper, suggests that the popularity of Ruble-Tether trading among those trying to avoid traditional finance is becoming more pronounced.
The Dark Side of Digital Assets?
Digital assets and their connection with rogue elements have long been a subject of concern. The case of North Korea using cryptocurrencies to fund its illegal weapons program exemplifies these fears.
Earlier this year, the Bitzlato crypto exchange’s Russian founder found himself in US authorities’ custody. Bitzlato is considered a significant darknet resource. Adding to the tension, the European Union imposed a fresh set of sanctions against Russia to intensify the pressure on Moscow due to the ongoing Ukraine conflict.
According to Arda Akartuna, a senior cryptocurrency threat analyst at Elliptic, the urge to transfer assets into crypto could rise in tandem with increasing sanctions. Akartuna sees a parallel in the situation that unfolded in Afghanistan during the Taliban takeover.
The Russian Ruble and Tether: Spikes Amid Crises
The increased trading volume on June 24 is a pattern seen before during periods of crisis. The highest peak between the ruble and Tether was recorded in July 2022 when it exceeded $21 million. In the wake of the invasion of Ukraine in February of the previous year, the volume had surged to $37.9 million.
Cryptocurrencies like Tether seem to offer a safe harbor in times of political instability and financial uncertainty. As global politics continue to fluctuate, we can expect heightened activity within the cryptocurrency market. This is especially true for countries like Russia which are wrestling with both political and financial instability.