The price of Bitcoin wavered Tuesday as dozens of missiles descended on Israel, according to news reports.
The U.S. had warned earlier that a ballistic missile strike from Iran was being prepared against the foreign ally. Later, the Iranian Mission to the United Nations said on Twitter (aka X) that Tehran’s response âhas been duly carried out.â
Bitcoinâs price fell 3.2% to $61,300 amid the volley, hitting its lowest price in two weeks, though it has ticked back up to $62,200 as of this writing. The dip reflected a lackluster start to so-called Uptober, a period of historically seasonal strength for ârisk assetsâ like stocks and crypto.
While Bitcoin has gained traction among investors as a âstore of value assetâ against inflation, the coin hasnât consistently performed well as a âflight to quality assetâ during times of geopolitical, Grayscale Investmentâs Managing Director of Research Zach Pandl told Decrypt.
âInvestors who are concerned about high geopolitical risks are, for now, still reaching for the traditional instruments,â he said, pointing to physical gold and U.S. Treasury bonds.
Despite Tuesdayâs dip, Pandl added that Bitcoinâs correlation with risk assets could shift alongside Bitcoinâs adoption by countries in the coming years.
âIn the longer term, when Bitcoin is widely held around the world and a reserve asset for central banks and governments, it may also be a common flight-to-quality asset,â Pandl said. âBut Bitcoin is still much earlier in its journey than treasury bonds or gold.â
While bursts of geopolitical conflict have previously dented Bitcoinâs price, asset managers like BlackRock have recently highlighted Bitcoinâs ability to serve as a hedge. This month, the firm said Bitcoin can diversify against âgeopolitical tensions, concerns over the state of U.S. debt and deficits, and increased political instability.â
President Joe Biden said Sunday that an all-out-war in the Middle East must be avoided as Israeli airstrikes battered Lebanon, killing dozens of people, per the Associated Press. The strikes followed last weekâs killing of Hezbollah leader Hassan Nasrallah, a major blow to the Iran-backed militant group and political party in Lebanon.
Bitcoin: âWeâre a global reserve of value like digital gold, that you want to hold in uncertain timesâ
Bitcoin during WWIII: *Dumps* https://t.co/vVVLXMuhYG
â Adam Cochran (adamscochran.eth) (@adamscochran) October 1, 2024
The escalation between Israel and Iran caused Bitcoin to sell off âsharply,â according to AndrĂ© Dragosch, Bitwiseâs European Head of Research. But he said on Twitter (aka X) Tuesday that Bitcoin has âhistorically performed relatively well following major geopolitical risk events,â adding that âgeopolitical news should generally be faded.â
Tuesdayâs unease was reflected in crude oil prices, as WTI spiked 3.6% past $70 a barrel. Meanwhile, the U.S. Dollar Index (DXY) rose 0.5%, reversing weakness seen in the dollarâs strength since mid-September. Gold jumped 1.3% to $2,670 per ounce. Stocks were down, however, alongside leading cryptocurrencies.
If rising oil prices translate into rising consumer prices, Pandl said the Federal Reserve is unlikely to abandon its easing campaign. He contrasted supply shocks with the possibility of persistent demand from Chinaâs oil-hungry economy post-stimulus.
âI think it would be likely that the Fed would look through any temporary increase in inflation,â he said. âA more important consideration could be […] the huge stimulus that we’ve seen from the Chinese government in the last couple of weeks.â
Bitcoinâs price plunged in April alongside geopolitical conflict in the Middle East after Israel struck Iran with a barrage of missiles. The dip to $60,000 was preceded a week earlier by missile and drone strikes in the region that also rattled Bitcoinâs price.Â
In February 2022, Russiaâs invasion of Ukraine had an instantaneous impact on the crypto market. Bitcoinâs price dropped 9% to around $35,000, as $200 million was swiftly wiped away from the global market capitalization of all cryptocurrencies.
Edited by Andrew Hayward
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