Bitcoin had been on the brink of establishing a fresh all-time high last week — but the bullish momentum was derailed when Israel launched a series of late-night airstrikes against Iran, with Tehran later responding in kind.
The world’s biggest cryptocurrency wasn’t alone in suffering selloffs. Global stock markets took a battering as investors digested the ramifications of this latest escalation in the Middle East. Oil prices rose, as did gold.
While BTC has recovered to some extent at the start of a new week, it remains below the $110,000 recorded last Wednesday. But a bigger question now is this: what lies ahead for the crypto markets?
To begin with, it’s significant to note that Bitcoin has resisted a drop below $100,000, despite this fresh bout of turbulence. In fact, BTC hasn’t returned to five-figure territory since early May. That’s impressive in and of itself.
In examining why this digital asset has been able to stay above this psychologically significant threshold, it’s worth bearing in mind that institutions have continued to acquire BTC at aggressive rates recently. Strategy’s Michael Saylor was also undeterred — and as he usually does on a Monday, confirmed that his company has bought an additional 10,100 coins… this time for $1.05 billion.
That means Strategy is now tantalizingly close to having more than 600,000 BTC in its treasury for the first time. But as some market watchers have noted, each and every purchase is dragging up the average cost per coin. That now stands at $70,666, giving Saylor less wriggle room in the event of a bearish contraction.
When it comes to the worsening conflict between Israel and Iran, there was a positive reaction to media reports that Tehran is seeking to resume negotiations over its nuclear programs. According to The Wall Street Journal, the country is “urgently signaling that it seeks an end to hostilities” — with messages sent through Arab intermediaries.
Looking forward, analysts have argued that it would take a significant escalation for BTC to succumb below $100,000. Yet recent price movements expose something of an uncomfortable truth for this cryptocurrency: while Bitcoiners argue that it’s a safe haven, a form of digital gold, it’s normally the first thing that investors dump in a risk-off environment.
Debate is also raging over whether the markets — both equities and cryptocurrencies — are fully pricing in the potential ramifications of a deepening conflict between both countries. For the past four days, 24-hour news channels have been dominated by dramatic pictures of missiles striking buildings, amid reports that hundreds of people have already been killed.
Analysts have argued that the recent tensions have the potential to last far longer than previous flare-ups — and any lull in hostilities may be mistaken as a sign that lasting peace has been achieved. YouHodler’s head of risk, Sergei Gorev, told Cryptonews:
“At the beginning of the conflict, the quotes of most risky assets decreased, including cryptocurrencies. The only asset that rose in value was gold. Gold usually rises in times of general uncertainty — both political and geopolitical, as well as economic. At the same time, cryptocurrencies grow more often in times of excess liquidity. By now, most Tier 1 cryptocurrencies have already recovered from their price drop. The market thus indicates that it does not firmly believe in the active development of the Iran-Israel conflict phase. Interest in both gold and cryptocurrencies is driven by the declining value of the U.S. dollar on the global foreign exchange market. This also benefits crypto investors. Therefore, market participants use the low-price moment to buy cryptocurrencies at more attractive prices even in the face of the possibility of military conflict.”
CoinShares painted a bullish picture in a recent report, citing data that showed digital asset investment products attracted $1.9 billion in inflows last week despite “geopolitical concerns.” That’s the ninth consecutive week in positive territory, and takes the year-to-date total to a cool $13.2 billion.
Image: CoinSharesAnd while the spate of companies snapping up vast amounts of Bitcoin may have shielded this cryptocurrency from sharp drops in the short-term, some analysts have raised fears that this could cause headaches in the months and years to come.
Coinbase’s global head of research David Duong explored this further in a recent blog post, where he argued there’s a significant difference between the publicly listed companies turning to BTC to diversify their portfolios — and those “solely focused on crypto accumulation.”
Duong argued that some of these vehicles could end up facing “forced selling pressure” as they battle to service their debts in a downturn, which “could lead to market liquidations and a sell-off in crypto more broadly.”
There could also be problems in a less drastic scenario. Should such a company “unexpectedly offload” Bitcoin for innocuous reasons — such as “routine cashflow management” — he fears it could trigger sudden price declines and a wider rush to sell, destabilizing the market.
Zooming out then, and it seems that Bitcoin’s bull run remains in a precarious position. While the crypto markets are showing signs of strength for now, threats continue to linger on the horizon.
The post Israel-Iran Conflict: Is Bitcoin at Risk? appeared first on Cryptonews.
