Bitcoin has shown resilience in the face of geopolitical turmoil, but its status as a safe haven remains uncertain.
When the Iran conflict erupted in late February, Bitcoin initially dipped to $63,176. However, it has since recovered, rising about 12% to $71,012 as of Wednesday. This rebound stands in contrast to gold, which has seen a significant 11% drop over the same period, marking its largest weekly loss since 1983.
Gold’s Decline and Bitcoin’s Recovery
Gold, traditionally seen as a safe haven, has been weighed down by rising oil prices and inflation fears. Meanwhile, Bitcoin has outperformed gold, but experts remain skeptical about its role as a safe haven asset.
Jonatan Randin, a senior market analyst at PrimeXBT, notes that Bitcoin continues to behave like a risk asset rather than a safe haven. “It sells off alongside equities during geopolitical shocks, and it’s range-bound and showing weakness within a broader downtrend. That’s not safe haven behavior,” he said.
Liquidity Drives Bitcoin’s Price
Matthew Pinnock, co-founder of decentralized finance project Altura, emphasizes that global liquidity remains the primary driver of Bitcoin’s price. “BTC is trading as a high-beta liquidity asset, which means tighter financial conditions, such as higher real yields and a strong dollar, reduce marginal capital and pressure the price,” he explained.
A September 2024 analysis by Sam Callahan of treasury company OranjeBTC found that Bitcoin’s price had a 0.94 correlation with global liquidity between May 2013 and July 2024. Bitcoin moved in the same direction as global M2 in 83% of 12-month periods, higher than gold’s 68.1% alignment.
Geopolitical Events and Bitcoin’s Reaction
While Bitcoin has reacted to global news events, including geopolitical shocks and social media posts from influential figures, these moves tend to be short-lived. Randin points out that Bitcoin’s sensitivity to liquidity conditions means it reacts more to financial tightening than to geopolitical stress itself. This complicates the idea of Bitcoin as ‘digital gold.’
Oil Shock and Inflation Concerns
Near-term inflation concerns have been shaped by rising oil prices and supply disruptions following the closure of the Strait of Hormuz. Randin explains that higher oil prices feed into inflation expectations, reduce the likelihood of rate cuts, and keep real yields elevated. This tightens financial conditions and suppresses risk appetite, limiting demand for assets like Bitcoin.
President Trump’s announcement to pause Iran strikes on Tuesday pulled Brent crude oil prices back down, but the broader implications for Bitcoin remain. “Bitcoin could be better understood as a long-term monetary debasement hedge rather than a short-term inflation hedge,” Randin said. “It responds to the expansion of money supply over multi-year cycles, not to CPI prints. On the timescale of a war-driven oil shock, it still behaves like the risk asset it is.”
Bitcoin’s Risk Profile Amid Conflict
Despite holding up relatively well since the strikes began, Bitcoin’s behavior during the Iran conflict aligns with a risk asset. Each escalation has triggered selloffs and tighter correlation with equities. However, the context is crucial: Bitcoin entered the conflict already in a technical bear market, down over 40% from its October highs.
Onchain data suggests continued accumulation, declining exchange reserves, and growing holdings among large wallets. However, this positioning is still constrained by macro conditions. “Right now, inflation driven by a hike in oil prices due to geopolitical factors is pushing yields higher and keeping central banks hawkish, which tightens liquidity. That creates a ‘bad inflation’ regime where BTC falls alongside other risk assets,” Pinnock said.
Until liquidity conditions ease and Bitcoin decouples from equities during stress events, its role as a safe haven remains unproven. The current environment highlights the complex interplay between geopolitical events, financial conditions, and Bitcoin’s price dynamics.
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