Many major cryptocurrency exchanges globally have extensive systems in place to track and prevent transactions to help international authorities crackdown on criminals. These same systems could be used to help prevent Russian-linked cryptocurrency transactions.

So far, Chainalysis has not seen any unusual crypto-related activity coming out of Russia, and Ms Malcolm believes it would be unlikely for any organisations or individuals designated by the sanctions to move large quantities of crypto now.

I find it pretty hard to believe that Russia would suddenly switch currencies [to Bitcoin]

Holon head of research Tim Davies

Cryptocurrency is being effectively used by the Ukrainian government, which has so far raised almost $US8 million ($11.3 million) in Bitcoin, Ethereum and other cryptocurrencies after posting an appeal on Twitter for aid.

In the past two weeks, the price of Bitcoin has fallen 15 per cent, continuing a decline since November last year which has seen the digital asset fall by nearly 50 per cent to $52,000.

The fall, which has been in line with global markets reacting to the crisis in Ukraine, has drawn into question the perception of Bitcoin as a hedge against macroeconomic volatility, with the asset often referred to as “digital gold” by its supporters.

Loading

Josh Gilbert, cryptocurrency market analyst at eToro, said Bitcoin’s positioning as a safe haven asset was no longer applicable given the crypto’s increasingly close correlation with traditional financial markets.

“Why we’ve maybe considered it a safe haven in the past was because it had very, very low correlation to any other asset,” he said. “But now what we’re seeing is that correlation has really increased. The correlation between the Nasdaq and Bitcoin is one of the highest we’ve seen for a very long time.

“It has potential to be a safe haven asset ... but it’s going to take many, many more years for us to really consider it like digital gold.”

Looking over the longer term, both Mr Gilbert and Mr Davies believe the Ukraine crisis could serve to further legitimise use cases for cryptocurrency, with Mr Gilbert pointing to the $11 million in aid sent to the Ukrainian government via crypto as an example of a positive use for the nascent asset class.

“If you can get the people in need access to capital quickly through cryptocurrencies ... that really demonstrates the main goal of crypto to ultimately change the financial system as we know it.”

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.