The impact of war on cryptocurrency can be significant, though it depends on various factors like the scale, location, and participants in the conflict. Here’s a breakdown of how war tends to affect the crypto market:

1. Increased Demand as a Safe Haven

• Flight from fiat: In regions affected by war (e.g., Ukraine, Gaza, Sudan), local currencies often devalue rapidly. People turn to Bitcoin, USDT, or Ethereum as a store of value.

• Example: After Russia invaded Ukraine in 2022, crypto donations to Ukraine surged, and citizens from both nations increased crypto usage to bypass banking restrictions.

2. Market Volatility

• Uncertainty drives volatility: Wars trigger market-wide fear. While Bitcoin is often considered “digital gold,” it can still experience sharp price swings as traders react emotionally.

• Global investor risk-off sentiment: In major geopolitical crises, investors tend to pull out of risk assets—including crypto—and move toward cash or gold.

3. Sanctions and Crypto Usage

• Evading sanctions: Crypto can be used to bypass economic sanctions. For example, Russian entities reportedly explored crypto solutions to access international trade.

• Regulatory response: In turn, countries tighten regulations and monitor blockchain transactions more closely to prevent illicit finance.

4. Infrastructure Risk

• Cyberwarfare: Crypto exchanges or blockchain networks could be targeted in cyberattacks. A war involving cyber-capable nations (e.g., USA, China, Russia) might threaten the integrity of blockchain infrastructure.

• Internet access: War zones often face blackouts or destruction of internet infrastructure, which can limit access to crypto wallets and exchanges.

5. Innovation and Adoption

• Adoption under necessity: In war zones or authoritarian regimes, crypto adoption can accelerate due to necessity. People use it for remittances, cross-border payments, or fleeing capital controls.

• Example: Syrian refugees and Afghans have used crypto to preserve and transport wealth when fleeing conflict.

6. Impact on Mining

• Energy disruption: War can affect countries involved in crypto mining by disrupting energy supplies or causing blackouts. This can reduce mining hash rates or shift mining activity to safer regions.

Conclusion

War tends to increase the practical value of cryptocurrency in crisis zones while also causing short-term volatility and long-term shifts in regulation and infrastructure. It’s both a stress test and an accelerant for the crypto ecosystem.