- The war in Iran weighs on the world economy.
- Yet, Bitcoin is seen to outperform other assets.
- Here’s what analysts say will happen if the conflict escalates.
Bitcoin is set to “outperform other assets” as the war in the Middle East threatens to escalate this week, an analyst says.
The top cryptocurrency’s price plunged below $68,000 on Monday morning after President Donald Trump warned the US would “hit and obliterate” Iranian power plants unless Tehran fully opens the Strait of Hormuz by 23:44 London time on Monday.
Iran’s army responded by warning that any such attack would see it target energy and desalination infrastructure “belonging to the US and the regime in the region,” threatening to throw the world economy into further chaos.
But that escalation can help push Bitcoin to “outperform other assets and remain well supported, if not outright accelerating higher,” David Brickell, head of international distribution at FRNT, an institutional capital markets and advisory platform, told DL News.
Bitcoin “is the ultimate hedge against the failure of existing economic and political structures given its non-sovereign, immutable, borderless characteristics,” Brickell said.
The comments come as Bitcoin is up about 2% in March. The cryptocurrency has been far less affected by the Iran conflict than other assets like Brent crude and gold, which have respectively surged by 48% and dropped 18% this month.
Still pressure on Bitcoin
To be sure, Bitcoin could also suffer from the war in the Middle East, with the spectre of a global recession looming over markets.
The Federal Reserve is less likely to cut interest rates on the back of the conflict and traders are now starting to price in rate hikes later this year in order to curb inflation. That will likely affect risk-on assets like tech stocks and cryptocurrencies, experts say.
“A prolonged conflict in the Middle East would generally be negative for Bitcoin,” Georgii Verbitskii, founder of the crypto trading platform TYMIO, told DL News on Sunday. “Any disruption to global trade routes increases uncertainty across financial markets.”
This uncertainty will put pressure on equities, Verbitskii said.
“Bitcoin is still highly correlated with risk assets, particularly US stock indices. When those markets come under pressure, Bitcoin usually follows.”
Crypto market movers
- Bitcoin is down 1% over the past 24 hours to trade at $68,100.
- Ethereum is down 2.3% over the past 24 hours to trade at $2,036.
What we’re reading
Eric Johansson is DL News’ managing editor. Got a tip? Email him at eric@dlnews.com.