The price of Bitcoin saw a sharp decline of around $4,000 on October 1, following the escalation of conflict in the Middle East. After Iran launched approximately 200 ballistic missiles at Israel, tensions soared, leading to significant market shifts.
Commodities Surge Amid Conflict
As fears of war spread, traditional safe-haven assets like gold and crude oil saw gains. Gold prices climbed by 1.4%, reaching $2,665 per ounce, just shy of an all-time high, while crude oil prices spiked by 7% to $72 per barrel. Meanwhile, bonds and the U.S. dollar also strengthened as investors sought safer investments in the face of geopolitical uncertainty.
Li Xing, a Financial Markets Strategist at Exness, explained, “The escalating conflict in the Middle East has prompted investors to seek security in gold, bolstering its appeal amidst broader market uncertainty.”
Bitcoin’s Decline: A Blow to Its Safe-Haven Status?
While traditional safe-haven assets surged, Bitcoin moved in the opposite direction, dropping by more than 3% in the past 24 hours. The cryptocurrency fell from an intraday high of $64,000 to a low of $60,315. It has since recovered slightly, trading at $61,800 at the time of writing.
According to Coinglass, approximately 154,770 traders were liquidated over the past day, with total liquidations reaching $521 million. This rapid sell-off has reignited debates on whether Bitcoin can truly be considered a safe-haven asset.
Historically, Bitcoin’s performance during geopolitical events has been mixed. In April, Bitcoin dropped by over 8% following another conflict between Iran and Israel. Analysts such as Jeroen Blokland, founder of the Blokland Smart Multi-Asset Fund, have suggested that investors are selling Bitcoin in favor of gold, which is perceived as a more reliable hedge in times of crisis.
Experts Weigh In on Bitcoin’s Role as a Safe-Haven Asset
Opinions on Bitcoin’s role in the current financial landscape vary. Jesse Colombo, a precious metals analyst, emphasized that Bitcoin and cryptocurrencies tend to fall during periods of geopolitical turmoil. He stated, “That confirms my long-held belief that crypto is not a safe haven. It’s yet another risk asset just like high-flying tech stocks.”
Tech stocks also suffered on October 1, with Apple and Nvidia both declining by around 3%, while the Nasdaq 100 dropped more than 2%.
However, BlackRock CEO Larry Fink remains optimistic about Bitcoin’s potential, suggesting it could evolve into an alternative inflation hedge. Speaking to Fox Business, Fink highlighted Bitcoin’s ability to serve as a long-term inflationary defense.
Markus Thielen, Head of Research at 10x, echoed these sentiments, noting that Bitcoin was initially designed as a peer-to-peer cash system, not a safe-haven asset. He added, “Bitcoin is still maturing and has yet to fully transition into its potential role as a gold substitute, which some believe will occur if governments outlaw individual gold ownership.”
For now, Thielen believes Bitcoin’s price will continue to be influenced by broader economic cycles, as the current global economic outlook remains uncertain.
