Key Points
- The rising geopolitical tensions may influence Bitcoin’s price action.
- Bitcoin’s market dynamics are different this time, with global liquidity on the verge of increasing.
Bitcoin’s [BTC] price has been influenced by various factors over the years, including economic impacts and geopolitical exposure. The question now is whether the escalating geopolitical outcomes in the Middle East could affect Bitcoin.
It is important to note that physical conflict is detrimental to human progress, and our sympathies go out to those affected. Major geopolitical conflicts can have a widespread impact, particularly on markets. Investors may become hesitant to invest not only in Bitcoin but also in the broader risk-on investment landscape during times of conflict.
Previous Impact of Conflicts on Bitcoin
This was evident in February 2022 during the Russia-Ukraine conflict. Bitcoin and other cryptocurrencies experienced significant outflows as the investment landscape adopted a cautious stance. The question now is whether Bitcoin will face a similar situation this time.
In the past five days, Bitcoin has experienced significant outflows, falling from $66,000 to $60,450. Exchange inflows were higher than outflows, indicating that Bitcoin might dip below $60,000 towards the weekend if the selling pressure persists. However, it is worth noting that both inflows and outflows have been slowing down for the past three days.
Current Geopolitical Situation’s Influence
It remains unclear whether the volatile geopolitical situation has influenced the market sentiment so far. This week’s selling pressure might also be due to profit-taking from Bitcoin’s September rally. While it is possible that the escalating tensions may impact Bitcoin by influencing sentiment, the current situation is slightly different.
Bitcoin’s selling pressure in early 2022 was due to multiple factors impacting the cryptocurrency. This was also when governments were raising interest rates, leading to faster outflows of liquidity from the market. However, one of the significant differences now is that global liquidity is on the brink of increasing due to rate cuts, making the dynamics quite different this time.
In conclusion, while geopolitical tensions may still have a short-term impact, this impact may be mitigated by the changing liquidity situation.