Early Investing

News Fix: Ukraine Turns to Crypto, NFTs Cool Off and Public Pensions Divest From Russia

News Fix: Ukraine Turns to Crypto, NFTs Cool Off and Public Pensions Divest From Russia

Since Russia invaded Ukraine two weeks ago, the war has taken over worldwide news headlines. From the atrocities of war to human rights catastrophes, heroic acts by Ukranians and the impact of the war on the global markets, it’s hard to keep up with all of the news. Here are some investing-related developments you may have missed.

Crypto Market Update

Bitcoin dipped to its lowest point of the past month — $34,750 — on February 24, the day Russia invaded Ukraine. That was just barely above bitcoin’s lowest price of the year. But it’s only March. And if the unprecedented world events over the last two years have taught investors anything, it’s that cooler heads prevail. So hold on to your crypto and stay strong.

Now let’s get into the headlines.

Ukraine Receives More Than $54 Million in Crypto Donations

The Ukrainian government and Come Back Alive, an NGO providing military support, have received more than 102,000 crypto donations totaling $54.7 million since February 24. And it’s not just bitcoin. The contributions so far include $18.2 million in ether, $17.2 million in bitcoin and nearly $10 million in a mix of U.S. dollar-pegged stablecoins. 

The rapid response demonstrates a compelling case for crypto. When the country declared martial law, Ukraine’s central bank suspended electronic cash transfers. Then, Twitter accounts belonging to the Ukrainian government began soliciting crypto donations for the first time. 

“Cryptocurrency is particularly suited to international fundraising,” says Tim Robinson, chief scientist at blockchain analytics firm Elliptic.  “It doesn’t respect national boundaries and it’s censorship-resistant — there is no central authority that can block transactions, for example in response to sanctions.”

For many Ukrainians, crypto became the only way out. Kuna, a popular Ukrainian crypto exchange, shows that domestic buyers are paying a premium for Tether’s USDT stablecoin.

“We don’t trust the government. We don’t trust the banking system. We don’t trust the local currency,” said Michael Chobanian, founder of Kuna, in an interview with CoinDesk. “The majority of people have nothing else to choose apart from crypto.”

War Cools Down the NFT Market

The ripple effect of the war in Ukraine is also impacting the NFT (non-fungible token) world. Daily trading volume across OpenSea, the largest NFT market in the world, dropped to a little over $50 million on Saturday — an 80% drop from the all-time high of $247 million reached on February 1. According to data from NonFungible.com, total NFT sales across the entire market dropped from $924 million in late January 2022 to $167 million on Monday. 

Meanwhile, gold topped $2,000 on Tuesday. Investors tend to flee to traditional safe haven assets during times of crisis, so none of this is surprising. But given that the Ukrainian government now plans to issue NFTs to support the country’s armed forces, it seems that NFTs still have a major part to play in this unfolding crisis.

Public Pensions Want to Divest From Russia

As the war between Russia and Ukraine disrupts oil prices and stock markets, a growing number of investors are evaluating their Russian investments. Public pension funds across the U.S. want to divest from Russia. The Pennsylvania Public School Employees’ Retirement System voted to divest its holdings (around $270 million to $300 million total) in Russia and Belarus. CalPERS (the California State Teachers’ Retirement System), which holds around $420 million in public equities and $345 million in real estate assets in Russia, halted new investments and is evaluating its real estate holdings. In New York, the NYC Police Pension Fund voted to divest from its Russian securities — a total of $42.2 million.

But the closure of the Moscow Stock Exchange and the illiquidity of some of these assets have made it difficult for these funds to sell off their Russian investments. Meanwhile, stock markets in the U.S. have taken a dive as oil prices continue to climb. If you have investments in Russia, you have some hard decisions to make. The world has changed. And your investment calculus needs to change as well. 

U.S. Venture Firm With Russian Ties Navigates a Global Crisis

Public pension funds aren’t the only ones grappling with Russian connections. Silicon Valley venture capital firm Fort Ross Ventures has deep ties in both the East and West. Fort Ross has invested in more than 30 startups based in Europe, Israel and the U.S. — including Uber, eToro and Insurify. The firm is led by general partner Victor Orlovski, a former Sberbank CTO. Sberbank, Russia’s oldest and largest bank, has been sanctioned by the U.S. and Europe.

“Everything that is going on now touches us from a business and personal perspective,” Orlovski said. “We have family members and friends in Ukraine, and we really worry a lot about what’s going on there.”

Orlovski said despite Sberbank’s sanctioned status, Fort Ross can still receive money from the institution. And even if any of the firm’s limited partners are hit with sanctions, the firm is diversified enough that it shouldn’t cause much damage. But the issue raises interesting questions about how investors should navigate the moral and financial repercussions of war.

That’s your News Fix for the month. Stay tuned for the next one — and stay safe.

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