Bitcoin rebounds amid Middle East military escalation uncertainty

Bitcoin, the largest cryptocurrency, recently bounced back from its steepest drop in over a year, marking the beginning of potential volatility across asset markets as investors grapple with the looming prospect of a military escalation in the Middle East. Bitcoin yesterday rose by a maximum of 5.9% and was traded at around US$64,600 as of 11.40am in London.

Smaller cryptocurrencies like Polkadot and Uniswap experienced an even more substantial rally, exceeding 10%.

This surge came after Iran launched drones and missiles against Israel, seemingly in response to a strike in Syria that resulted in the deaths of top Iranian military officers. This marks a new, dangerous phase of conflict in the region. As most markets were closed during Iran’s action, crypto traders were among the first to respond to this significant geopolitical event.

Head of research at FalconX, David Lawant, suggested that more investors than usual might be choosing to express their market views through crypto. The escalating tension between Israel and Iran negatively impacted stocks on Friday while bolstering havens such as bonds and, the dollar.

According to Coinglass data, approximately US$1.5 billion of bullish crypto bets via derivatives were liquidated on Friday and Saturday, marking one of the highest two-day liquidations in at least the past six months.

Ebtikar noted that the heavy leverage has gotten completely overwhelmed in the last three days, so that’s caused prices to materially deteriorate in digital assets. With most Middle Eastern stock markets in the red yesterday, Israeli equities relinquished earlier gains to trade slightly lower as of 8.36am London time.

A significant military escalation between Israel and Iran could challenge the belief that Bitcoin and other cryptocurrencies serve as havens during times of conflict, a view often promoted by supporters of these assets. Cryptocurrencies were in the early stages of a market meltdown when Russia invaded Ukraine earlier in 2022, a downturn that persisted until the end of the year.

Bitcoin is currently down from its mid-March record of US$73,798. Dedicated US exchange-traded funds that debuted in January initially bolstered the token to an all-time high, yet net inflows into these products have recently slowed.

Crypto speculators are now awaiting the so-called Bitcoin halving, which will cut the new supply of the token in half, anticipated around April 20. Although this event has historically boosted prices, there are increasing doubts about a similar outcome this time, particularly considering Bitcoin’s recent peak, reported Bangkok Post.