Under the scenario of Israel striking Iran, the cryptocurrency market will witness a complex and indirect reaction, reflecting the changing nature of this market and its interaction with geopolitical events and the macroeconomic economy. Here are my expectations for this:
1. Initial volatility and low (risk aversion):
* Immediate reaction: Initially, as tensions and news of the strike escalate, major cryptocurrencies such as Bitcoin and Ethereum are likely to see their value depreciate. Investors tend to be “risk aversion” In times of geopolitical crisis, they divest from “dangerous” assets Such as cryptocurrencies to switch to safer assets such as gold or government bonds.
Liquidity: Investors may also seek to liquidate some of their cryptocurrency holdings to provide liquidity under uncertainty.
2. The role of Bitcoin as a safe haven (in the medium term):
* Divergence of opinion: There is an ongoing debate about whether Bitcoin can be considered a "safe haven" Like gold in times of crisis. Some supporters argue that due to its limited scarcity and decentralized nature, it can maintain or even increase its value amid inflation or political instability that may affect fiat currencies.
Possible scenario: After the initial shock of the decline, if economic uncertainty persists and inflation worsens (due to rising oil prices, for example), some investors may begin to turn to Bitcoin as a hedge against these risks, which could lead to a gradual recovery in its price. This depends heavily on how severe the crisis is and its global economic fallout.
3. Stablecoins as a channel for conversion:
* Increased usage: In times of extreme volatility, investors in the cryptocurrency market tend to switch to stablecoins (such as USDT, USDC) that are pegged to stable asset values (such as the US dollar). This allows them to stay in the cryptocurrency market and avoid the sharp fluctuations of other currencies, while maintaining the value of their assets.
Liquidity and temporary haven: Stablecoins will see a rise in trading volume as a channel for conversion between volatile cryptocurrencies and pegged assets.
4. Impact of inflation and capital flight:
Inflation: As mentioned earlier, any major conflict in the Middle East will lead to higher oil prices and thus increase global inflation. Cryptocurrencies, especially Bitcoin, are sometimes seen as a hedge against inflation (although recent studies have shown an inverse correlation at times). If investors feel that fiat currencies are losing their purchasing power due to rising inflation, they may turn to digital assets.
Capital flight: In conflict-affected areas, individuals may turn to cryptocurrencies as a way to move assets and secure wealth away from traditional banking systems that may be affected by instability. This could increase demand for cryptocurrencies in those regions.
5. Regulatory monitoring:
Increased scrutiny: In times of crisis, governments and regulators may increase their scrutiny of the movement of cryptocurrencies, especially if they are used to illegally transfer funds or to fund parties involved in the conflict. This may affect liquidity on some exchanges or impose new restrictions.
Summary of expectations:
* In the very short term (initial shock): Cryptocurrencies are likely to see their value depreciate due to general risk aversion.
Medium term (crisis adjustment): If uncertainty and inflation persist, Bitcoin may begin to regain some of its value and is considered a potential haven for some investors. Stable currencies will see a rise in usage.
Relying on the intensity of the conflict: All these projections depend heavily on the severity of Israel's strike on Iran, the scale of Iran's response, and the extent of the conflict in the region. Limited conflict may lead to short-term volatility, while widespread conflict may cause deeper and longer-term disruptions in cryptocurrency markets.
In short, the cryptocurrency market, by its volatile nature, will inevitably be affected by any major escalation in the Middle East, but its reaction may be multifaceted between the initial decline and the search for potential safe havens.
