‘Russia’s Ethereum’ Rejects Roots While Token Goes Parabolic

(Bloomberg) -- The founder of a Russia-rooted blockchain project has revealed his Ukrainian background, after the price of his project’s token went parabolic -- partly thanks to its association with Russia.

In a volatile crypto market whipsawed by geopolitical tension, Waves, the native token of the Waves blockchain, has jumped by more than 170% in the past two weeks. Valued at more than $2.7 billion, the token is now the 51th largest cryptocurrency by market value, according to data on CoinGecko. Waves is best known as a public blockchain with strong links to Russian entities such as state-owned manufacturing giant Rostec and private bank Alfa-Bank after collaborations with the organizations.

“The direct cause of Waves’ skyrocketing prices can be attributed to the Western nations’ Feb 27 statement to cut some Russian banks from the SWIFT message system,” said Peter Guo, a researcher at Hong Kong-based crypto investment firm Babel. “Some people could be rushing into Waves in response to potential economic sanctions and limited traditional payment channels.”

A Google search shows interest in Waves has risen in the past few days, with many online references calling it Russia’s Ethereum.

Waves founder Alexandr “Sasha” Ivanov told Bloomberg in an interview from Dubai that both he and the project have cut their relationships with Russia.  

“Maybe people associate me with Russia, but I am actually Ukrainian,” said Ivanov, who claims to hold citizenship for both nations, adding that he lived in Ukraine until he was 17, and moved to Russia for school and work. He didn’t attribute the Waves price move to current events.

“I don’t think there’s any connection between the situation in Russia and the current market action around Waves,” Ivanov said.

Waves’ development team started moving out of Russia last summer, and the main office and the majority of the Waves staff have reloaded to Miami, Ivanov said. Some of the staff are also in Dubai and the Netherlands.

The project debuted with a partnership with the Russian state-owned defense conglomerate and another with Alfa-Bank. Waves later distanced itself from Russia by selling its Vostok -- Russian for East -- brand in 2019 and registered the Waves brand in Switzerland.

Russia’s invasion of Ukraine seems to have undermined the development at Waves, according to Ivanov, who pointed Waves’ price returns as a market reaction to a recent announcement of the project’s roadmap for 2022.

“We had announcements about our plans for this year a couple of weeks ago and after that, markets just reacted to it,” he said.

Blockchain data doesn’t seem to back that perspective. Waves’ 2022 roadmap was announced on Feb, 10. Waves’ price dropped by nearly 9% on the same day. The price run-up took off on Feb 28, according to data from TradingView and Binance.

Data from blockchain data firm Nansen shows that since Feb. 28, the total amount of Waves tokens going into the FTX exchange went from nearly zero to as much as 135,242. Nansen told Bloomberg the Wave tokens that went to a FTX-labeled deposit wallet were generated, or minted, by an address closely associated with the Waves project itself.

Blockchain security firm PeckShield said that a sudden increase of a token’s supply on an exchange is usually associated with market making, an area that’s hard to track on a centralized exchange.

“It is hard to make a conclusion on why the project is minting tokens to FTX,” Babel’s Guo said. “From what we’ve known in the past, this sort of flow usually comes with large sell pressure or exchanging for a stablecoin or fiat.”

There was no involvement with the token’s supply flow, Ivanov said. The tokens on FTX were a “wrapped” version of Waves on the Ethereum blockchain that has nothing to do with the native token, which is on Waves blockchain, he said.

“This is not true at all, we don’t do business with FTX, nor market making with them,” Ivanov said.

A FTX representative said the exchange does not provide any market making services for cryptocurrencies and they don’t know the reason behind Waves’ supply surge to the exchange. No notable flows of Waves token were seen from popular crypto market maker GSR and Wintermute, they told Bloomberg.

In an October 2020 statement, Waves announced it started issuing tokens on Ethereum to “enhance interoperability” between the two blockchains. Ivanov said he did not want the Ethereum version of Waves in the first place, saying that FTX did not want to list Waves until they integrated the Ethereum version of Waves token.

FTX only counts a tiny amount of Waves’ trading volume. The token is mostly traded on Korean exchange Upbit, according to CoinGecko. Upbit didn’t respond to a request for comment. 

©2022 Bloomberg L.P.