Cryptocurrency, Sanctions and Agricultural Prices: An empirical study on the negative implications of sanctions and how decentralized technologies affect the agriculture futures market in developing countries

TL;DR

This study examines how sanctions due to the 2022 Russia-Ukraine conflict impact agricultural prices and explores the potential of cryptocurrencies like Bitcoin as a hedge, using empirical analysis across six developing countries.

Contribution

It provides empirical evidence on the effects of sanctions on agricultural markets and introduces cryptocurrency as a novel hedging tool in developing countries.

Findings

Cryptocurrencies can serve as effective hedges against sanctions-related market disruptions.

Transaction volume strongly influences agricultural commodity prices.

Bitcoin's volatility is offset by its low correlation with commodity prices.

Abstract

The 2022 Russia Ukraine War has led to many sanctions being placed on Russia and Ukraine. The paper will discuss the impact the 2022 Russian Sanctions have on agricultural food prices and hunger. The paper also uses Instrumental Variable Analysis to find how Cryptocurrency and Bitcoin can be used to hedge against the impact of sanctions. The 6 different countries analyzed in this study including Bangladesh, El Salvador, Iran, Nigeria, Philippines, and South Africa, all of which are heavy importers of wheat and corn. The paper shows that although Bitcoin may be volatile compared to other local currencies, it might be a good investment to safeguard assets since it is not correlated with commodity prices.Furthermore, the study demonstrates that transaction volume has a strong relationship with prices.