Historically, Bitcoin (BTC) has seen significant volatility during times of geopolitical instability as financial market investors shift liquidity to safer assets, including riskier crypto assets.
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Russia-Ukraine invasion
On February 24, 2022, Russia invaded Ukraine, when the BTC price was around $39,000, down from around $44,500 a week earlier. The economic downturn triggered by the impending invasion of Ukraine caused investors to be risk-averse and uncertain.
By March 1, 2022, BTC prices had almost fully recovered to around the $44,000 mark. After the peak in volatility, the Bitcoin price rose to $48,000 at the end of March 2022, but steadily fell throughout the year - starting 2023 at around $16,600.
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Israel-Palestine
Hamas attacked Israel on October 7, 2023, when BTC was trading at around $28,000. In contrast to Russia’s invasion of Ukraine, Bitcoin prices fell by less than 6% over the next five days to around $26,500.
By October 25, 2023, the BTC price reached $35,000, but by October 27, 2023, when Israel invaded Gaza, the Bitcoin price had fallen by nearly 5%. In a stark contrast to the price volatility in 2022, the BTC price surpassed $40,000 in early December 2023 and broke through $73,000 for the first time on March 12.
What to Expect
In light of Iran’s retaliatory attack on Israel, the price of Bitcoin has plummeted from a high of $67,000 two hours ago to a current low of $62,000 at the time of writing.
As geopolitical tensions rise – Israel expects the Iranian salvo to be launched by 23:00 GMT – the market sell-off in risky assets is likely to continue as liquidity seeks safer havens as a store of value.
Interestingly, however, gold, which is often considered a safer store of value, has fallen sharply, losing about $100 per ounce in the past five hours. Moreover, this downturn could be a harbinger of a broader sell-off as investors abandon multiple asset classes or cover losses.
The coming months are likely to be the result of a panicked reaction to the direct impact on the global economy, and the prospects for a bleak start to the summer are currently looking grim.
With less than a week until Bitcoin’s 2024 halving event — where many miners prepare to have their rewards cut in half — the timing of this geopolitical event makes for a perfect storm for a cryptocurrency crash.
