Bitcoin’s Response to the Iran Conflict
Bitcoin emerged as the first asset to reflect the tensions stemming from the Iran war, being the only liquid market active at the onset of U.S. and Israeli attacks a few Saturdays ago. On that day, its value took a significant hit, dropping by 8.5%. However, just two weeks later, it managed to outperform gold, the S&P 500, Asian stocks, and the Korean stock market. Only oil and the dollar have shown stronger performance, both directly benefiting from the ongoing conflict.
Interestingly, the debate over Bitcoin’s safe-haven status, which had been a topic of conversation during last year’s price drop, seems to be resurfacing among investors. Notably, the declines are lesser now, while the volatility has increased, portraying Bitcoin as a quick shock absorber in the global market.
We can identify a clearer pattern if we examine the buying activity following each downturn. For instance, following the initial attack on February 28, Bitcoin’s price bottomed at $64,000. After Iran’s retaliatory missile strikes on March 2, the price fell to $66,000. By March 7, amid ongoing tensions, it dipped further to $68,000, then stabilized around $69,400 after a tanker attack on March 12. More recently, the low following events in Kharg Island was set at $70,596.
In essence, each sell-off has found buyers at progressively higher prices. This has led to an upward trend, creeping up by about $1,000 to $2,000 with each notable event, while the resistance level seems to be around $73,000 to $74,000, which has seen four rejections so far.
Strong Hold
What stands out is Bitcoin’s performance in comparison to other assets over the past two weeks. For instance, oil has surged over 40% since the war’s initiation, while the S&P 500 is in decline. Gold has fluctuated significantly, and Asian stocks experienced their worst week since March 2020.
That being said, it doesn’t imply that Bitcoin will instantly become a safe haven. It still reacts to market headlines which sometimes lead to sell-offs. Yet, each recovery seems to be faster and reached at higher levels than before.
The difference compared to early this year is quite remarkable. Back in February, a sudden wave of liquidations caused Bitcoin’s value to plummet to $77,000 in just a weekend. This wiped out approximately $2.5 billion in leveraged positions and resulted in an $800 billion loss in market cap since its peak in October.
Initially, this event seemed damaging enough to undermine market confidence for a prolonged period. However, it appears to have eliminated weaker investors, reset positions, and resulted in a tighter market that has been absorbing the fallout from ongoing war news without triggering the same level of induced sell-offs.
In the broader context, macroeconomic concerns persist. President Trump recently stated that he would avoid investing in oil infrastructure on Iran’s Kharg island “for common sense reasons,” but indicated a willingness to reassess if Iran continues restricting access to the Strait of Hormuz. Iran has warned that any assaults on its energy resources would lead to retaliatory actions against U.S. interests.
This nuanced threat could exacerbate what the IEA has termed the largest disruption in supply history if it occurs. Yet, Bitcoin’s response to the war is revealing about its evolving market role.
It’s not strictly a safe haven, nor is it purely a risk asset. Instead, it operates as a 24/7 liquidity option that reacts to shocks more rapidly than most. This unique quality is reshaping its perception in the financial landscape.
