Bitcoin trading denominated in the Russian rouble went into overdrive when the invasion began on Thursday, with daily volumes rising 259% from a day earlier to 1.3 billion rouble ($13.1 million), according to data from CryptoCompare.

In Ukraine, meanwhile, crypto exchange Kuna saw its daily trading volume more than treble to 150 million hryvnias ($5 million).

Bea O'Carroll, managing director at Radkl, a digital asset investment firm, said the war and Western sanctions had seen a trend emerge of bitcoin being used to transfer value.

"Basically, having a currency that is not controlled by the government, that is not affected by the emergency acts ... is really interesting," she added. "Maybe this is how Russia gets its value moved around. Equally, on the other side, there was 'this is how people are going to get value to the Ukrainians'."

In the five days since Russia invaded Ukraine on Feb. 24, bitcoin has risen 13%, while the S&P 500 U.S. stock index that it often mimics is up around 2% and traditional safety play gold is now largely flat after gaining as much as 3.5% on the day of the invasion.

On the day of the attack, about $300 million short bitcoin positions were liquidated, Coinglass data showed, while Singapore-based QCP Capital said "a good portion" of leveraged long positions had been taken out.

As well as being largely anonymous, crypto holdings and transactions are often held in wallets on decentralised platforms that can be accessed from anywhere.

ENTER THE OLIGARCHS

"Bitcoin could be a potential safe haven for Russian oligarchs avoiding sanctions as there will be no censor on the Bitcoin network and on cryptocurrency transactions," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"Cryptocurrencies could act as a powerful store of value for a major part of holdings that don't need to be liquid."

Yet for crypto fans, the fact that such holdings could offer a route around sanctions could be a double-edged sword.

"It could lead to regulations from NATO countries against usage of crypto, but the flip side is that there could be broader adoption in places with geopolitical turmoil," said Katie Talati, head of research at digital asset manager Arca.

Ukraine was also quick to spot an opportunity in the crypto world's reach and anonymity. Vice-Prime Minister Mykhailo Fedorov tweeted the wallet addresses of bitcoin and ether, alongside an appeal: "Stand with the people of Ukraine. Now accepting cryptocurrency donations."

Fedorov's government and Ukrainian non-governmental organisations raised over $22 million in cryptocurrencies after the appeals, according to blockchain analysis company Elliptic.

While bitcoin may be emerging as a currency of choice in areas of geopolitical risk, however, market players caution there are differing views over whether it can more broadly become a "safe-haven" asset, a form of digital gold.

For Zach Friedman, co-founder of crypto brokerage Secure Digital Markets, bitcoin's post-invasion gains serve to enforce the "narrative around bitcoin's store of value during turbulent times".

STABLECOINS ON FIRE

Elsewhere: money is flowing into "stablecoins", which are pegged to traditional assets such as the U.S. dollar.

As of Friday, stablecoin transactions comprised over 83% of the total crypto market's 24-hour trading volume according to CoinMarketCap.

USD Tether, the largest stablecoin saw its market capitalization climb to an all time high of nearly $80 billion, while gold-backed cryptocurrency PAX Gold added nearly $100 million to its market cap in two days.

($1 = 98.9450 roubles; $1 = 29.7000 hryvnias)

(Reporting by Lisa Mattackal and Medha Singh in Bengaluru, Alun John in Hong Kong and Vidya Ranganathan in Singapore; Editing by Vidya Ranganathan and Pravin Char)