Bitcoin’s price movement has been influenced by various factors over time. From economic forces to geopolitical events, the question arises: could the escalating geopolitical tensions in the Middle East have an impact on Bitcoin?
Before delving into the potential effects on Bitcoin, it is essential to acknowledge a crucial point. Conflict, particularly of a physical nature, hinders human advancement, and our thoughts are with those affected.
The implications of significant geopolitical conflicts reverberate across various sectors, particularly in the financial markets.
During times of conflict, investors often exhibit hesitation not only towards investing in Bitcoin but also in the broader risk-on asset classes.
This pattern was evident in February 2022 when the conflict between Russia and Ukraine erupted. Bitcoin and other cryptocurrencies experienced substantial outflows as market participants adopted a more cautious approach.
Could Bitcoin face a similar scenario amidst current events?
In the past five days alone, Bitcoin has witnessed notable outflows, dropping from $66,000 to $60,450 at the time of writing.
Over the last 24 hours, there were 10,278 BTC in exchange inflows while outflows stood at 9,278 BTC.
The higher exchange inflows compared to outflows suggest that Bitcoin might dip below $60,000 over the weekend if selling pressure persists.
Nevertheless, it is important to highlight that both inflows and outflows have been tapering off in the last three days.
The extent to which the current volatile geopolitical environment has influenced market sentiment remains uncertain. The selling pressure witnessed this week could also be attributed to profit-taking following Bitcoin’s rally in September.
While it is plausible that escalating tensions may impact Bitcoin sentiment, the current circumstances possess unique characteristics.
In early 2022, Bitcoin faced immense selling pressure due to a combination of factors bearing down on the cryptocurrency, including governments raising interest rates, leading to a rapid outflow of liquidity from the market.
One major distinction this time around is the imminent expansion of global liquidity owing to anticipated rate cuts. In essence, the dynamics at play differ considerably from previous instances.
Ultimately, while geopolitical tensions may exert a short-term influence, this impact could be mitigated by the evolving liquidity landscape.