When October started, investors in the crypto space were buzzing with the excitement of “Uptober”, a term which is combination of “Up” and “October” as October usually brings higher gains in the cryptocurrency markets, particularly for Bitcoin and Ethereum.
But just when things were getting cozy, this happened and hopes of an Uptober immediately evaporated.
Bitcoin soon fell by 5%, sitting just above $60,000 mark, Solana saw falls of 8%, and Ethereum dropped by 6%.
But wait! We have been told that Bitcoin or cryptocurrency serves as a safe haven against geo-political conflicts. And the stuff like that crypto is decentralized, Bitcoin can serve as a reliable store of value during global instability, and it is a digital alternative to gold.
So why is it so that this so-called safe haven could not withstand a single conflict which has not even started at a full scale.
Let’s dig down as why crypto market reacted negatively to the conflict and whether the much anticipated crypto bull run is still on the horizon or if it’s been put on hold. Maybe for a while.
Geopolitical Situation and Global Markets
So, here’s the situation: on October 1st, Iran fired over 400 missiles into Israel (Yes! you read that right, FOUR. HUNDRED.)
It marked a significant escalation in an already tense region. These attacks were in retaliation to Israel’s earlier killings of Hamas and Hezbollah leaders including Ismael Haniya and Hasan Nasarullah. Since then, the tensions in the region have raised concerns about an all-out war involving Israel, Iran and the USA, tipping the geopolitical tension meter to an all-time high.
The global markets acted accordingly and we saw an increase in the prices of gold and oil. Gold increased around 1.4% to $2,665 an ounce on October 1. Gold bugs were popping champagne.
Whereas, the price of a barrel of crude oil increased by as much as 7% to $72. Similarly, bonds and the US currency also increased.
Meanwhile, crypto was… well, let’s just say it didn’t get the memo about being a “safe haven.”
Impact on the Crypto Market
Contrary to the traditional markets, prices of cryptocurrencies started falling as a result of the Iranian attack. Bitcoin sharply dropped in value by around 3.1% to about $61,616 on the day of the attack. Ethereum and Solana also experienced sharp declines, raising concerns over the resilience of digital assets as a safe haven.
The entire crypto market dipped on Oct 1. Bitcoin fell overall by around 5%, sitting just above $60,000 mark, Solana saw falls of 8% and Ethereum dropped by 6%.
It was like someone hit the “panic sell” button. Bitcoin saw an overall decline of about $4,000, from an intraday peak of $64,000 on October 1 to a low of $60,315 at evening of the same day. There were reports that 154,770 traders were liquidated with around $521 million.
Ouch! Clearly, the crypto market isn’t exactly built to withstand a geopolitical hurricane.
These price drops suggest that, despite growing institutional interest in digital assets, the crypto market remains highly sensitive to external shocks and geopolitical risks.
Historical Trends
Conflicts like the Israel Iran tension typically have a negative impact on the markets. They bring uncertainty, which leads to a sell-offs. In the past, crypto market has proven to be highly reactive to news events and global conflicts.
This isn’t the first time crypto has stumbled when the world gets chaotic. Back in February 2022, cryptocurrencies fell after Russia invaded Ukraine. Bitcoin fell by 8% to $34,324, while many small token were losing around 10% in value. Overall, around $200 million were wiped from the market capitalization of all cryptocurrencies.
Similarly, during the trade war between the USA and China during 2018-2020, price of Bitcoin fluctuated more as trade tensions intensified. Likewise, in April and July of 2024, price drops in Bitcoin were observed amid tensions in the Middle East.
But there was one exception: in 2017, during North Korea’s missile tests, prices of gold and Bitcoin experienced a surge. Gold at the time was trading at $1,326 per ounce, while BTC set a price above $4,600.
So, we can safely assume that global conflicts have a negative impact on the price of cryptocurrencies and this is exactly what we witnessed on October 1st.
Is Crypto Still a Safe Haven?
Now, let’s address the elephant in the room: Is Bitcoin really a “safe haven”?
The recent decline in Bitcoin’s price has sparked renewed debate about whether Bitcoin can serve as a reliable store of value during periods of global instability or not.
Bitcoin advocates have long argued that the cryptocurrency could serve as a safe haven. Bitcoin has been positioned as a digital alternative to gold. But Bitcoin hasn’t consistently performed well and still has not proved itself as a quality asset during times of geopolitical conflict. As we examined earlier, Bitcoin’s performance in multiple crises has raised questions about its resilience in times of global unrest.
The recent sell-off also suggests the same. The drop in price following Iran’s attack has raised concerns that Bitcoin may not be as “safe” as many proponents claim.
Investors are reaching for the traditional assets like gold or U.S. Treasury bonds as the conflict between Iran and Israel, prompted many investors to bet their money on gold instead of bitcoin, thereby increasing the price of gold.
So, why did everyone run back to gold like it’s still 1985? Turns out, old habits die hard. When the world goes crazy, investors still trust good old shiny gold more than digital currencies. At least for now.
Investors betting on gold instead of bitcoin shows that there is a decreasing trust in the Bitcoin. This also indicates that investors still see gold as the more reliable hedge than Bitcoin against global instability.
Is Upcoming Crypto Bull Run in Danger Now?
Okay, so does this all mean the long-awaited crypto bull run is off the table?
Crypto investors have long been waiting for a crypto bull run during which, they believe, Bitcoin price will cross its all-time high of $74000. September’s rally had everyone thinking, “This is it! The bull run is here!” and some investors believed that it could start happening in October as October has traditionally been a favorable month for cryptocurrencies but the very start of the month has dissipated all such optimism.
While some investors remain concerned that the geopolitical instability may linger, others are optimistic that the market can recover before the month is out. Indeed, there’s already been a bit of recovery.
Some market analysts believe that Bitcoin’s long-term prospects as a hedge remain intact. They argue that Bitcoin is in a strong position to appreciate significantly and there is a strong possibility that Bitcoin will hit six figures this year. The technical analysts are suggesting that Bitcoin is in a bullish flag pattern that is likely to break out soon.
Some experts have touted the current conflict as a Black Swan event that has caused a pullback in the market. A Black Swan event is an event that comes as a surprise and has a major effect. Crypto advocates believe that that this pullback is an opportunity to buy more crypto at a cheaper price and are hopeful that the conflict will be ultimately resolved after which the market will recover. The current uncertainty in the markets is not great for Bitcoin, but it is not likely to lead to a major price crash.
So the hopes of a crypto bull run aren’t over yet and investors will continue to wait for it till it finally happens.
Conclusion
The recent price drops remind us that the crypto market is still very much tied to global events. The Iran-Israel conflict showed that Bitcoin and other digital assets aren’t as immune to geopolitical shocks as we’d like to think. While some investors see this dip as a chance to buy the dip, others are treading cautiously, waiting to see how things unfold.
Overall, investors are likely to continue viewing digital assets with a mix of caution and optimism, depending on how global events unfold in the coming weeks. With the situation between Iran and Israel still developing, further volatility can be expected.
Whether Bitcoin can shake off the jitters and rise to new heights or if gold will remain the king of safe havens is still anyone’s guess.