Crypto Logs: Geopolitics and Digital Assets

03/24/22 | Roxanna Islam, CFA

During the past few weeks, domestic and global events have brought further attention to cryptocurrencies. Both Russia and Ukraine have increased applications of cryptocurrencies since Russia’s invasion, which has highlighted some of the use cases for crypto (e.g., faster, more efficient transfer times and relative stability compared to fiat currency during times of conflict). Meanwhile, as cryptocurrency takes off domestically, the U.S. has initiated a framework for digital assets that could be supportive for crypto-related companies, while also facilitating broader adoption of digital assets. These developments have broad implications for the cryptocurrency landscape, as well as the constituents of the Alerian Galaxy Global Blockchain Equity, Trusts & ETPs Index (BCHAIN) and Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts & ETPs Index (CRYPTO). More details on these key takeaways from March are below:

U.S. establishes crypto framework. President Biden signed an executive order on March 9 to establish national policies for digital assets. The order explores a broad framework that includes: consumer and investor protection, financial stability, mitigating illicit finance, promoting U.S. leadership in the global financial system, financial inclusion, and responsible innovation.(1)

  • Index takeaways: For many crypto investors, regulating cryptocurrencies sounds counterintuitive given that Bitcoin was created from the need to decentralize finance. But most have viewed this move as a positive for crypto-related companies, particularly crypto exchanges or crypto miners. A digital asset framework should support innovation within the U.S., especially when compared to countries like China which have set up regulations to drive out crypto miners. More regulation for digital assets should also encourage broader adoption among institutional investors and corporations, who may be unable or unwilling to participate in the crypto economy due to the current lack of regulations.

Russia explores crypto as a means to avoid foreign manipulation. Western governments, including the U.S., froze Russian central bank assets and placed economic sanctions on the country. In response, the Russian Ruble (RUB) has already seen a rapid devaluation from the economic downturn. Previously before the conflict escalated, one U.S. dollar (USD) was worth an average of 75 RUB—reaching as much as 135 RUB per USD in early March.

  • Index takeaways: Russia’s economic collapse has proven the effectiveness of sanctions as a powerful tool to isolate other country’s economies. In the future, governments may explore holding more digital assets, rather than fiat currencies, which are more easily manipulated by other foreign governments. On March 17, Russia granted the country’s largest bank, Sberbank, a license to issue and exchange cryptocurrency after being cut off from transferring USD and other Western currencies.(2) Although cryptocurrency like Bitcoin can be affected by macroeconomic factors, it is less susceptible to currency devaluation from geopolitical events.

Ukraine uses crypto as a fast, efficient payment system. On March 17, Ukraine signed a bill which legalized crypto. Ukraine has raised over $100 million in cryptocurrency donations since the Russian invasion a few weeks ago, including over $60 million donated directly to the government’s official donation fund.(3)

  • Index takeaways: Ukraine has been using social media as a fast and efficient method to reach global audiences, including setting up an official government donation fund in cryptocurrencies. Cryptocurrency transactions are often faster and less costly compared to traditional banking transactions which can take close to a day to be validated when sent to foreign countries. And much like the situation with the RUB, the Ukraine Hryvnia (UAH) has seen some devaluation since the conflicts escalated, which makes Bitcoin and other cryptocurrencies a more stable option.

Broad tech sector volatility. The tech sector has seen volatility throughout 2022 with most of the uncertainty stemming from anticipation of the Fed raising interest rates. While initially selling off due to fear of higher interest rates, the market is now experiencing some volatility after the Fed finally raised interest rates on March 17 and provided commentary on the trajectory for interest rates.

  • Index takeaways: While Bitcoin isn’t usually highly correlated with tech stocks, the majority of companies in the crypto sector (e.g., crypto exchanges, crypto miners) are early stage, high growth technology companies. These indexes have been largely affected by tech sector volatility given their high technology weightings—CRYPTO holds a 45.6% weight to technology stocks, while BCHAIN holds a 39.1% tech sector weighting as of March 21, 2022—and have seen greater pressure than both broader technology stocks (measured by the Nasdaq-100 or NDX) and Bitcoin (BTC).

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Bottom Line:

In March, interest rate concerns brought some volatility to riskier crypto-related equities. But in the long run, there seems to be several emerging factors which are supportive of the digital asset environment including the U.S. cryptocurrency executive order, Ukraine’s legalization of crypto, and Russia’s move toward digital assets.

The Alerian Galaxy Global Blockchain Equity, Trusts & ETPs Index (BCHAIN) is the underlying index for the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC).

The Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts & ETPs Index (CRYPTO) is the underlying index for the Invesco Alerian Galaxy Crypto Economy ETF (SATO).


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[1] President Biden to Sign Executive Order | The White House

[2] Press Release (

[3] Ministry of Digital Transformation of Ukraine (

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