Russians pay a ‘matreshka premium’ for bitcoin

Investors are forking out nearly 50 per cent more to buy bitcoin in Russia, as sanctions bite and ‘digital gold’ becomes increasingly attractive.

Bitcoin this week overtook Russia’s rouble in terms of total value, and its price is rallying after early pressure when Russia’s invasion of Ukraine started. Picture: AFP

Russian citizens are paying a hefty premium for bitcoin, with the cryptocurrency trading for up to $US20,000 ($27,500) above the market rate on Russian exchanges, as the country faces crippling sanctions and local investors flock to “safe haven” assets such as crypto.

Russians are being forced to pay what has being described by cryptocurrency expert Defiprime.com as a “matreshka premium”, with data showing that bitcoin is being viewed as a safer asset than the rouble. The bitcoin/rouble pair has reached its highest trading volume since last May.

Bitcoin this week overtook Russia’s rouble in terms of total value, and its price is rallying after early pressure when Russia’s invasion of Ukraine started, with Russian investors paying nearly 50 per cent more than their counterparts in other countries, according to statistics from Defiprime.com.

The term “matreshka premium” refers to matryoshka dolls – the colourfully painted Russian nesting dolls. It’s also a reference to “kimchi premium”, a term used to describe the difference in price between crypto assets on Korean exchanges compared with the rest of the world due to tensions between North and South Korea.

At one stage, Korean investors were paying as much as 50 per cent more for bitcoin than investors in the rest of the world.

Nigel Green, the chief executive and founder of deVere, said Russians were gobbling up bitcoin due to its status as a “digital gold”.

Bitcoin’s price was likely to hit $US50,000 before the end of this month, he said, after the biggest cryptocurrency by market capitalisation jumped in price by more than 15 per cent in one day.

“In the past 24 hours, bitcoin surged by more than $US6000 at one point to above $US44,000 – its sharpest daily increase since February 2021,” Mr Green said, adding that bitcoin could pass its all-time highs of $US68,000 from November last year.

Ukrainian-Russian geopolitical tensions and institutional investment were key drivers for sustaining the price push, he said.

“As banks close, ATMs run out of money, there are threats of personal savings being taken to pay for war, and the major international payments system SWIFT is weaponised, among other factors, the case for a viable, decentralised, borderless, tamper-proof, unconfiscatable monetary system has been laid bare, he said. “And as alternatives, such as crypto, prove to be credible and workable, the dollar’s Reserve Status could, ultimately, be in jeopardy.

“Savvy investors know this and will be further increasing their exposure to cryptocurrencies before prices rise further.”

He added that as more and more institutional investors took control of the sector, credibility increased, trading volumes went up and volatility went down – good news for everyday investors.

“Developments in recent days have put a spotlight on bitcoin’s key traits, which include being borderless, permissionless, censorship-resistant and unconfiscatable,” he said. “This is why bitcoin is now the 14th most valuable currency in the world.”