Have you ever wondered how geopolitical crises affect Bitcoin ($BTC )? Here are two key mechanisms explaining the relationship between tensions in the Middle East and Bitcoin prices:
1. Bitcoin as a new 'safe haven'
With limited supply, decentralization, and resistance to inflation, Bitcoin has become regarded as a safe asset akin to gold for some investors.
• Hedge against inflation: When tensions in the Middle East escalate (such as conflicts between the United States and Iran), investors expect rising oil prices, leading to global inflation.
• Capital flows: To mitigate the risks of declining traditional asset values, investors shift funds into Bitcoin, thereby boosting demand and raising prices.
Example: During the escalation of tensions between the United States and Iran, Bitcoin often sees inflows as a hedge against geopolitical uncertainty.
2. Changes in regional capital flows
Long-term international sanctions on some Middle Eastern countries have made Bitcoin a key tool for evading financial sanctions and facilitating cross-border money flows.
• Iran as an example: Under prolonged U.S. financial sanctions, demand for Bitcoin in Iran increases as conflicts intensify.
• Survey: A survey by 'Portal Trade' that included 1,650 Iranians holding Bitcoin revealed the following:
Approximately 30% of them own Bitcoin worth more than $5,000, which is close to the average levels in the United States or Europe.
About a quarter of them achieved monthly gains ranging from $500 to $3,000.
More than a third of them made their gains from Bitcoin mining, and about 60% through trading.
• Increased regional demand: As tensions escalate in the Middle East, regional capital flows into Bitcoin — driven by asset preservation, evasion of sanctions, and new investment channels — increasing regional demand and affecting global supply and demand dynamics to raise prices.
In conclusion: Understanding these geopolitical and economic mechanisms is crucial for traders seeking to make informed decisions in the Bitcoin market.