The ongoing Middle East conflict has traders warning of potential short-term declines in riskier assets like bitcoin (BTC). As the conflict entered its fourth day on Tuesday, the death toll reached nearly 1,600 on both sides. Greta Yuan, head of research at digital assets platform VDX, noted that worsening geopolitics in the Middle East over the weekend led to increased market risk-averse sentiment, causing spot gold to rise by almost 1%. Meanwhile, crypto markets experienced a 2% slump on Monday as traders factored in rising oil prices and a drop in traditional equities.
Futures Traders Face Liquidations
Over a 24-hour period from Monday, futures traders betting on higher prices saw more than $100 million in liquidations. Alternative currencies also experienced a sell-off. Despite these setbacks, the crypto markets are demonstrating early resilience that may boost confidence among bullish investors. Jeff Mei, COO of crypto exchange BTSE, pointed out that bitcoin’s price temporarily dipped following the shocking news of the conflict but has since stabilized.
Geopolitical Struggles Impact Bitcoin
The military tensions between Russia and Ukraine in early 2022 serve as an example of how geopolitical struggles can significantly impact the niche asset class. Bitcoin lost as much as 7% in a single day due to the tensions. During such times, investors typically turn to gold, while riskier assets tend to decline. Some traders suggest that investors should monitor oil and energy market changes to gauge bitcoin’s future direction.
Energy Prices and Conflict Escalation
Alex Kuptsikevich, FxPro senior market analyst, advised that if the risks of conflict expansion and escalation materialize, investors must keep an eye on energy prices. Rising oil prices are prompting a wave of sell-off in equities, fueling expectations of tighter monetary policy. Kuptsikevich added that, for now, the chances of appetite for equities and cryptocurrencies shrinking are higher compared to previous weeks.
Bitcoin’s Resilience Amid Middle East Conflict
Despite the potential negative impact of the Middle East conflict on bitcoin and other cryptocurrencies, the market’s early resilience offers a glimmer of hope for investors. The quick stabilization of bitcoin’s price after the initial shock of the conflict news indicates that the market may be able to withstand short-term geopolitical turmoil. However, investors should remain cautious and vigilant, keeping an eye on energy prices and other market indicators to make informed decisions.
Investor Strategies During Geopolitical Struggles
In times of geopolitical unrest, investors may consider diversifying their portfolios to minimize risk. Allocating a portion of investments to traditional safe-haven assets like gold can provide a buffer against potential declines in riskier assets like bitcoin. Additionally, monitoring energy prices and other market indicators can help investors anticipate and react to changes in the market.
Conclusion
While the Middle East conflict has traders warning of potential short-term declines in riskier assets like bitcoin, the market’s early resilience offers some hope for investors. The quick stabilization of bitcoin’s price after the initial shock of the conflict news suggests that the market may be able to withstand short-term geopolitical turmoil. However, investors should remain cautious and vigilant, keeping an eye on energy prices and other market indicators to make informed decisions. Diversifying portfolios and allocating a portion of investments to traditional safe-haven assets like gold can help minimize risk during times of geopolitical unrest.
