Key Points
- Bitcoin and other altcoins are experiencing a downward trend as crude oil prices surge due to potential Middle East conflicts.
- Bitcoin has been identified as a strong performer during crisis periods, potentially serving as a hedge against inflation.
Bitcoin, along with other altcoins, is currently on a downward trajectory.
This decline comes as crude oil prices rise amid increasing chances of a broader crisis in the Middle East.
Bitcoin Dips Below $60,000
For the first time since September 16, Bitcoin (BTC) fell below $60,000.
This occurred following hints from Joe Biden that he might back Israel in attacking Iranian oil facilities.
Other altcoins, including Ethena (ENA), Conflux (CFX), and Beam (BEAM), also plummeted, with losses exceeding 15%, making them the top 100’s worst performers.
Meanwhile, crude oil prices rebounded, with Brent and West Texas Intermediate experiencing over 4% increases to $76.5 and $73, respectively.
American indices like the Dow Jones and Nasdaq 100 also felt the impact, reversing previous gains and falling by over 50 bps.
Implications of Middle East Conflict
Biden’s statement has heightened the risk of a broader conflict in the Middle East.
Senior Israeli officials have reportedly stated that the country is ready to go to war with Iran.
Traders on Polymarket currently predict a 63% chance that Israel will attack Iranian oil this month.
A prolonged Middle East conflict could significantly impact all asset classes, including cryptocurrencies.
It could lead to increased oil and gas prices as Iran exports over 1.3 million barrels a day.
Furthermore, due to the Red Sea’s crucial role in the shipping industry, a conflict could result in supply chain disruptions.
These factors could then affect the ongoing interest rate cycle managed by the Federal Reserve and other central banks.
Bitcoin’s Performance in Crisis Periods
According to a recent note by three Blackrock analysts, Bitcoin performs better than other assets during periods of geopolitical issues.
They referenced six major events, including the US and Iran escalation, the COVID outbreak, 2020 US election challenge, Russia’s invasion of Ukraine, US banking crisis, and the yen carry trade unwinding.
In all these instances, Bitcoin outperformed the S&P 500 index and gold over a 60-day period.
Blackrock also highlighted several potential catalysts that could drive Bitcoin’s value higher in the long term.
These include US debt dynamics, its long history of outperformance, its status as an uncorrelated asset, and its 21 million supply cap.
Other analysts, including Michael Saylor, have suggested that Bitcoin could eventually serve as a hedge against inflation.
