Nikolas Sargeant
Tensions in the Middle East may affect the crypto markets, potentially leading to a temporary decline in riskier assets like bitcoin (BTC). The ongoing conflict between Hamas and Israel has entered its fourth day on Tuesday.
Greta Yuan, head of research at VDX, stated that the conflict in the Middle East has raised concerns about its impact on nearby oil-producing countries. This has made investors more cautious and sensitive to market risks. As a result, the price of spot gold increased by almost 1% due to the worsening geopolitics and the overall risk-averse sentiment in the market. Crypto markets experienced a 2% slump earlier on Monday as traders considered the impact of rising oil prices and a decline in traditional equities on international trade.
Over a 24-hour period from Monday, futures traders who were betting on higher prices experienced over $100 million in liquidations. This happened because alternative currencies experienced a sell-off. Despite this, the crypto markets are showing signs of early resilience, which may inspire confidence among bullish investors. According to Jeff Mei, the COO of crypto exchange BTSE, Bitcoin's price temporarily dipped after the shocking news of the conflict but has already stabilized. In the past, crypto assets have demonstrated resilience in the face of increasing geopolitical turmoil.
When the U.S. imposed sanctions on Russia in March of last year, Bitcoin and the broader crypto market experienced a strong recovery. Recently, in early 2022, military tensions between Russia and Ukraine caused Bitcoin to drop by 7% in a single day. This demonstrates the importance and influence of geopolitical conflicts on the niche asset class. During these situations, investors usually turn to gold as a safe haven, while riskier assets tend to decline.
Traders advise monitoring oil and energy market changes to understand Bitcoin's potential trajectory. Rising oil prices can lead to a sell-off in equities and tighter monetary policy, posing a significant risk to assets like Bitcoin. It is important to monitor the risks of expansion and conflict escalation to gauge the macroeconomic implications. Alex Kuptsikevich, FxPro senior market analyst, emphasizes the need to pay attention to energy prices.
According to Kuptsikevich, if there is a fast return to normalcy, it could benefit cryptocurrencies. However, it appears unlikely at the moment. He also mentioned a higher chance of a decrease in interest for equities and cryptocurrencies compared to previous weeks.
