The crypto landscape in times of war
Cryptocurrencies are stateless, decentralized, anonymous digital currencies, which have often been viewed as a kind of doomsday insurance. They were supposed to be resilient to the fluctuations of the real world, but they have not exactly delivered on that promise as the new dominant international asset.
Currency volatility in the crypto landscape
The lack of stability influences the stability of foreign exchange rates. Since cryptocurrencies have much less ties to the physical world, they are supposed to be currencies that remain stable in the face of uncertainties caused by war, the shifts in geopolitics, and inflation. Moreover, many expected cryptocurrencies to flourish when things change for the worse in the real world, saying they would be seen as safe havens for investment.
However, this is not happening. Instead, cryptocurrencies have shown huge volatility over the last few weeks, when the war on Ukraine and the sanctions against Russia shook the world that was already stricken by the last two years of pandemic.
Slow advance remains the trend
Despite this volatility, cryptocurrencies are slowly but steadily gaining ground, which is most obvious in how more and more platforms adopt technologies that let buyers pay with crypto. There is no conspicuous rise in trading volume, even though that was expected at the start of the war.
At that time, concerns were raised that Russian oligarchs would be using cryptocurrency transactions to evade international sanctions. That seems not to be the case, although there are reports of Russians liquidating their crypto assets to buy property in the UAE as a low risk investment. At the same time, Ukraine has been receiving donations in crypto, which they have been using to buy military equipment (such as night-vision goggles and bullet-proof vests), coordinated by their Ministry of Digital Transformation.
Why is crypto not booming?
Experts suggest various reasons why cryptocurrencies might not be picking up at the rates expected among such wide-ranging insecurities. These include the following:
- Cryptocurrencies remain too confusing to average people
- While the National Bank in Ukraine is not 100% operational, it would make sense for people to move towards crypto. However, Internet access is also erratic for the same reasons, which hinders countrywide conversion – even if the Ministry of Digital Transformation is able to take advantage of quick and precise transactions using the donations described above.
- Expansive conversion to crypto runs the risk of calling legislators attention to the freedoms offered by the use of cryptocurrencies and the revocation of those freedoms by strict regulation.
- While early bitcoin was supposed to be an insurance policy against hyperinflation and government corruption, the price swings attracted many speculators, who further destabilize it.
- On the whole, the crypto scene is still too volatile for the taste of many traditional investors, and it is not generally viewed as “the” safe haven for investment.
Will cryptocurrencies become safe havens for savings?
The original premise of cryptocurrencies remains the same. The fact that they are not directly tied to the physical world and geopolitical developments through the blockchain technology that keeps crypto decentralized and anonymous contributes to its relative stability. However, cryptocurrencies are used by people, and no market can escape the fluctuations in the behavior of people.
If you wish to incorporate dealing in cryptocurrencies into your business model, you should learn when and how it makes sense to use them, and how to take advantage of the options offered by crypto trading. For example, Hungary has just introduced regulations that decrease taxes on profits made in crypto trade. With the right partners, you have every chance to benefit from this expanding area of business.
Accounting for cryptocurrencies
Whether or not you decide to risk the unknown seas of cryptocurrencies, it still stands that the right partners can help your business grow. Helpers Finance, for example, offers precise and efficient accountancy and bookkeeping services to small and mid-size companies in Hungary, with a specialized know-how in supporting foreign owners in making informed business decisions to let their company grow.
If you want to set up a business that deals in cryptocurrencies while taking advantage of the 9% corporate tax in Hungary, our crypto accounting specialist partners can take care of your accountancy. Alternatively, if you want to deal with cryptos as a natural person and relocate to Hungary based on the resulting income, our team can help you with Hungarian residency.
Are you interested in our services? Get in touch with us today! Just send an email to info@helpersfinance.hu, call our office on +36 1 215 0712, or fill in our contact form.
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