As the conflict between Israel and Iran escalates, the price of Bitcoin (BTC) remains stable.
Looking back at past conflicts, similar trends can be observed, with factors such as adoption rates and institutional participation playing key roles.
Analysts like André Dragosch, research director at Bitwise's ETP platform ETC Group, believe that Bitcoin's price may be affected in the days following the outbreak of conflict. While the volatility of BTC prices has generally been on a downward trend, it is still viewed as a risk asset that is likely to be quickly sold off when war breaks out.
However, as Mithil Thakore, co-founder and CEO of the Bitcoin Layer 2 liquidity protocol Velar, previously told Cointelegraph: "In the long run, geopolitical conflicts are likely to increase the outlook for global inflation due to factors such as increased fiscal spending, loose monetary policy, supply chain disruptions, and soaring commodity prices, all of which should be favorable for Bitcoin."
Throughout past geopolitical instability events, Bitcoin has shown remarkable resilience, but a lack of price volatility does not necessarily mean that Bitcoin serves as a hedge during uncertain times.
Here are several instances of Bitcoin's price response or lack thereof to large-scale armed conflicts around the world:
On June 13, Israel struck dozens of targets within Iran, marking the largest attack on the country since the Iran-Iraq War of the 1980s. As arch-rivals in the Middle East, the two countries continued to launch strategic missile strikes against each other in the following days.
Despite concerns that the conflict could escalate further, including calls for U.S. intervention from Israel, the market largely shrugged it off. Bitcoin was no exception.
Although asset prices briefly fell after the bombing began, they have largely recovered. Crypto analyst Za stated: "Bitcoin doesn't seem to be worried about the Israel-Iran conflict (at the moment)."
Perhaps the most famous Bitcoin bull, Michael Saylor, remained unfazed. On June 16, his company Strategy acquired 10,001 BTC for $1 billion. This purchase occurred after Strategy's third Bitcoin-backed preferred stock, STRD, began trading on Nasdaq on June 11.
On April 1, 2024, Israel attacked the Iranian embassy complex in Damascus, Syria, resulting in the deaths of several senior officials. In response, Iran seized Israeli vessels from the MSC Series and launched a series of attacks against Israel on April 13.
After both of these dates, Bitcoin's price experienced brief declines, with BTC dropping over 8% following the retaliatory actions on April 13.
However, as the market adapted to the new normal, so did Bitcoin, with its price continuing to rise.
On October 7, 2023, Hamas militants from Gaza launched attacks on targets within Israel, resulting in over 1,000 Israeli deaths and triggering an ongoing war and humanitarian crisis.
The Israeli market immediately suffered significant losses, while the stock prices of large arms manufacturers like Lockheed Martin soared.
Bitcoin was hardly affected, performing significantly better than its starting point in the 50 days following the initial attack.
After the attacks, reports emerged that Hamas was raising funds through cryptocurrency, leading regulators to once again call for stricter oversight of the sector, and the U.S. Treasury sanctioned a Gaza-based crypto operator allegedly linked to the organization.
Blockchain forensics firm Elliptic stated that there is "no evidence" to support claims that Hamas raised funds through cryptocurrency.
In early 2022, after eight years of war in the Donbas region of Ukraine, Russia launched a full-scale invasion, which Moscow referred to as a "special military operation."
Global financial markets were immediately affected, with the economies closest to Ukraine suffering the most significant losses. In contrast to this trend, Bitcoin's price rose 16% within five days of the invasion.
Exchanges within Russia and Ukraine saw crypto trading occur at astonishing premiums as people fleeing abroad attempted to circumvent currency controls through cryptocurrency.
A week after the war began, Ukraine received over $70 million in cryptocurrency donations, most of which were in Ether (ETH).
Bitcoin plummeted later that year, but this was primarily due to the collapse of the Terra stablecoin ecosystem and other market events, rather than concerns over the war in Ukraine.
While cryptocurrencies may serve as a safe-haven asset during conflicts in certain regions, their price volatility seems to overlook internal conflicts that do not impact traditional markets in Europe, the Middle East, and North America.
In November 2020, war broke out in Ethiopia's Tigray region after years of tension between the leftist nationalist Tigray People's Liberation Front and the Eritrean and Ethiopian federal governments.
This war resulted in hundreds of thousands of deaths and millions displaced internally, with the Catholic Near East Welfare Association describing it as underreported. A 2024 report from Geographical referred to it as "the world's forgotten war."
Bitcoin's price also paid little attention. At the time, the dominant narrative in the crypto market was driven by inflation concerns stemming from the COVID-19 pandemic and an unprecedented bull market fueled by institutional adoption from Block (then Square) and Strategy (then MicroStrategy).
Later that same year, just months after the Tigray war broke out, on February 1, 2021, the Myanmar military overthrew the National League for Democracy, launching a coup that has led to an ongoing civil war.
A month later, Bitcoin's price reached its then all-time high of $69,000.
A key factor in discussing Bitcoin's response to conflicts is the level of Bitcoin adoption—its exposure or correlation with traditional markets.
Some economists have noted the impact of geographical proximity to conflict. Financial markets in countries closer to conflict zones tend to experience more volatility and losses.
According to Chainalysis's 2024 Global Adoption Index, overall crypto adoption is highest in developing countries, with India, Nigeria, and Indonesia leading the way. The index includes on-chain crypto and retail value received by centralized services, as well as on-chain crypto and retail value received by DeFi protocols.
In contrast, Bitcoin ownership is increasingly concentrated among Western institutions and world governments. As of December 2024, ETFs alone held 1% of Bitcoin, surpassing the holdings of Satoshi Nakamoto.
The largest holders now include ETF issuers like BlackRock, regulated crypto exchanges such as Kraken and Coinbase, and even the U.S. government.
Bitcoin has only recently enjoyed this level of adoption, thus exposing it to traditional financial markets and institutional investment.
In 2013, Bitcoin experienced what some consider its first major bull market. The price started the year at $13, broke $100 in April, and reached $200 in October, closing the year above $1,000.
The following year marked the beginning of the "crypto winter," alongside two armed conflicts: the Donbas war, including Russia's annexation of Crimea, and the 2014 Gaza war.
During this period, crypto was still a niche industry, with miners able to use gaming PCs' graphics cards to mine Bitcoin. Kraken and Coinbase were only three and two years old, respectively.
Institutional participation was virtually nonexistent, and many viewed cryptocurrencies as merely "magic internet money," suitable only for illegal activities online.
Despite the outbreak of these two conflicts affecting stock markets, both regionally and further afield, there was little discussion in the crypto media (if it existed at the time) about the impact of war on Bitcoin's price.
Now, with increased institutional adoption, a crypto-friendly U.S. government, and international trade conferences attracting thousands, Bitcoin's price may be more susceptible to the negative impacts of armed conflicts on the market.
In almost all of the aforementioned conflicts, instances of Bitcoin's price quickly rebounding occurred before widespread institutional adoption. This paradigm shift has transformed Bitcoin's narrative from a safe-haven asset to a risk asset. BTC's correlation with traditional financial markets is higher than ever.
Nevertheless, analysts remain cautiously optimistic about Bitcoin in the current situation. QCP stated in a report on June 16 that escalating conflicts could lead to soaring oil prices, especially if "Iran blocks the Strait of Hormuz," and potential U.S. intervention could disrupt global risk assets.
Related: The probability of Bitcoin (BTC) dropping below $100,000 has sharply decreased, with current attention on the $106,000 liquidity level.
Original article: “Data shows Bitcoin (BTC) price stabilizes and rallies amid regional conflicts”
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