Bitcoin briefly dropped to $60,300 late Tuesday but rebounded to $61,500 during Asian trading hours on Wednesday, before dropping back to $60,230 at press time.
Source: BNC Bitcoin Liquid Index
The conflict in the Middle East has dampened hopes for a sustained rally in what is typically Bitcoin’s most bullish month. Israel has since vowed to retaliate, further heightening tensions in the region.
Iran launched around 200 ballistic missiles at Israel in response to prior Israeli attacks on Lebanon. Israeli Prime Minister Benjamin Netanyahu has threatened further military action in the coming days. This geopolitical instability led to Bitcoin’s steepest drop in over a month, with the cryptocurrency losing 6% at its lowest point.
Polymarket bettors now estimate a 43% chance that Israel will strike back at Iran by the week’s end, adding to market uncertainty.
Source: Polymarket
Uptober Cancelled?While October has shown historical strength for BTC, with only two of the past 11 years showing declines during this month, geopolitical tensions have led to falling hopes that this month will end being bullish, as a number of memes on X show.
Source: X
ZeroHedge and others also pointed to gold’s recent gains, outperforming BTC in the last 24 hours — a reflection of the maturity gap between the two assets.
ZeroHedge reported that “at approximately 9:32 AM EST, reports began circulating that Iran was imminently preparing to launch ballistic missiles at Israel. Interestingly, gold and Bitcoin responded in starkly opposite ways—gold surged while Bitcoin plummeted. This price action confirmed a long-standing frustration I have with Bitcoin: it behaves more like a risk asset than a true safe-haven. If Bitcoin were truly “digital gold,” I would expect it to rise during periods of geopolitical turmoil, not decline.”
Source: ZeroHedge
Was this market downturn a surprise? Not entirely. All markets typically react to geopolitical tensions, but Bitcoin tends to recover faster than other major assets.
Historically, Bitcoin has bounced back by an average of 37.5% within 60 days following major geopolitical events since 2020. In five out of the last six such instances, Bitcoin has outperformed both gold and the S&P 500 over the same timeframe.
As Blackrock wrote in their recent Bitcoin report, Bitcoin’s price performance during various geopolitical events reflects its emerging role as a global hedge. The report highlighted major events like the COVID outbreak, the U.S.-Iran escalation, and the 2022 Russia-Ukraine war, showing how Bitcoin has frequently outperformed traditional risk assets during such periods.
Even when traditional markets, including equities, suffer, Bitcoin has demonstrated resilience and recovery. For instance, the August 2024 sell-off saw Bitcoin’s recovery outperform both gold and the S&P 500 in the aftermath of the Yen Carry Trade unwinding.
Source: BlackRock
While the situation may feel dire, Bitcoin’s recent dip is only to levels seen two weeks ago. If past patterns hold true, Bitcoin is poised for a faster recovery than most other major assets.
