The Iran conflict has acted as a volatility driver for crypto, causing initial sharp dips followed by rapid recoveries as it serves as a non-sovereign hedge against geopolitical risk.
Most markets have experienced more volatility since the Iran war but Bitcoin and Ethereum are still significantly below their record highs. With Bitcoin going at $74,000 and Ethereum going for $2,400. Keep in mind that during the pick moments of the war the coins went for $63,000 and $2,100 respectively.
Chaos in the Middle East has been a drag on Bitcoin’s price since Israel first attacked Iran last year. Following attacks, Bitcoin has typically immediately dipped. When calm has followed, the coin’s price has risen. This time has been slightly different: Bitcoin has experienced more volatility but has outpaced stocks in terms of gains — giving it a temporary safe-have status.
“Geopolitics has been an important driver in recent months, which helps explain Bitcoin’s outperformance relative to equities, even though it still exhibits clear risk-on characteristics,” James Butterfill, head of research at CoinShares pointed out.
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The Oil and Crypto Connection!
When energy becomes more expensive, central banks tend to postpone rate cuts, restricting the liquidity for crypto markets. Oil prices have shot up since the start of the war but since Wednesday, have dropped as crypto and stocks rallied. Notably in Kenya there has been a continuous upward curve with an increment of 40 ksh per litre in both diesel and petrol.
James Butterfill noting on the current global oil price fluctuations said: “If the conflict were to de-escalate, the immediate effect would likely come through lower oil prices and reduced inflation pressure, increasing the probability of easier monetary policy, which tends to support Bitcoin.”
Since the onset of the geographical unrests, crypto prices have shown their highest levels of volatility but with time and a new dawn of peace approaching the prices are expected to stabilize again above $100,000 and $4,000 for Bitcoin and Ethereum respectively.
