Following sweeping sanctions from the West and the cooperation of major regional banks with SWIFT, the Russian ruble has depreciated significantly against the US dollar and bitcoin. As Russian banks urge calm, citizens are now making requests to local ATMs to withdraw their money.

The ruble in "free fall"

The dollar soared to more than 108 rubles after the market opened on Monday, compared to 83 rubles the week before. Bitcoin also soared against the devalued currency, and at the time of writing, each coin is now priced at 3,820,000 rubles – the highest price of the year.

As the West pressures Russia through wave after wave of sanctions and trade restrictions, demand for the ruble is collapsing. In addition, financial institutions in the region may struggle to stay afloat as U.S. allies agree to exclude Russian banks from SWIFT. SWIFT – the Society for Worldwide Banking and Financial Telecommunication – is the world's largest international financial information system.

To support the currency devaluation, the Bank of Russia more than doubled its key interest rate from 9.5% to 20%. The bank said it "will ensure that the deposit rate is raised to the level needed to compensate for the increased risk of devaluation and inflation."

“For now, the ruble is in near freefall,” Alex Kuptsikevich of FxPro said in a report. “At some point in the next few days, we will see the ruble fall to its limits and the ruble will start a slow and difficult recovery from there. But it’s hard to be sure.”

Bitcoin/ruble. Source: TradingViewBitcoin's role?

As FTX CEO Sam Bankman Fried hypothesized a few days ago, wartime conflicts could theoretically prompt people to withdraw funds from weaker currencies into "hard currency" assets like bitcoin. While Bitcoin initially fell on news of the Russian invasion, it has since rebounded quickly and is now trading at over $40,000.

Bitcoin also allows users to make long-distance payments without the use of centralized intermediaries such as banks. Given the situation, Russians have been withdrawing money from banks in droves, with cash demand reaching its highest level since March 2020. On Friday, Russia's central bank had to increase the amount of money it makes available to ATMs to keep pace.

Earlier this month, Russia announced that it would regulate digital assets as currency within its borders.

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