With Israel and Iran on edge in markets, will Bitcoin serve as a safe haven?

Bitcoin prices were shaken Tuesday after dozens of missiles fell on Israel, according to news reports.

The United States had previously warned that Iranian ballistic missile attacks were being prepared to target foreign allies. Iran’s mission to the United Nations later tweeted that Tehran’s response had been “appropriately implemented.”

The Bitcoin price fell 3.2% to $61,300, its lowest in two weeks, but has risen back to $62,200 at the time of writing. The decline reflected a sluggish start to the so-called Uptober, a historically seasonal bull period for “risk assets” such as stocks and cryptocurrencies.

Zach Pandl, managing director of research at Grayscale Investment, said Bitcoin has gained traction among investors as a “store of value” against inflation, but is also a “flight to high-quality assets” during geopolitical times. He said that he had not consistently achieved good results. decoding.

“Investors concerned about high geopolitical risk are still reaching for traditional instruments for now,” he said, pointing to physical gold and U.S. Treasury bonds.

Despite Tuesday’s decline, Pandl added that Bitcoin’s correlation with risk assets could change with the country’s adoption of Bitcoin in the coming years.

“In the long term, if Bitcoin becomes widely held globally and becomes a reserve asset for central banks and governments, it may become a common asset that improves its quality,” Pandl said. “But Bitcoin is still much earlier in its journey than Treasury bonds or gold.”

Although the eruption of geopolitical conflict has previously driven Bitcoin prices lower, asset managers such as BlackRock have recently highlighted Bitcoin’s ability to act as a hedge. This month at work said Bitcoin could provide diversification against “geopolitical tensions, concerns about the state of U.S. debt and deficits, and increasing political instability.”

President Joe Biden said Sunday that all-out war in the Middle East must be avoided as Israeli airstrikes hit Lebanon, killing dozens. Associated Press. The strikes followed the killing of Hezbollah leader Hassan Nasrallah last week, dealing a major blow to the Iran-backed militant group and Lebanese political party.

The conflict between Israel and Iran has led to a “rapid” sell-off in Bitcoin, according to André Dragosch, head of European research at Bitwise. But he said On Tuesday, Twitter (a.k.a.

Tuesday’s jitters were reflected in crude oil prices, with WTI surging 3.6% above $70 a barrel. Meanwhile, the US Dollar Index (DXY) rose 0.5%, reversing the weakness in dollar strength seen since mid-September. Gold rose 1.3% to $2,670 an ounce. However, stocks fell along with major cryptocurrencies.

The Federal Reserve is unlikely to abandon policy if rising oil prices lead to higher consumer prices, Pandl said. mitigation campaign. He contrasted the supply shock with the possibility of continued demand in China’s oil-starved economy. After stimulation.

“I think it’s likely that the Fed will consider a temporary increase in inflation,” he said. “A more important consideration (…) may be the massive stimulus we have seen from the Chinese government over the past few weeks.”

Bitcoin prices plummeted in April. geopolitical conflict In the Middle East after Israel attacked Iran with missiles. The decline to $60,000 occurred a week ago when missile and drone attacks occurred in the area, which also caused the price of Bitcoin to fall significantly.

Due to Russia’s invasion of Ukraine in February 2022 simultaneous It affects the cryptocurrency market. The price of Bitcoin fell 9% to around $35,000 as $200 million was quickly wiped from the global market cap of all cryptocurrencies.

Editor: Andrew Hayward