Bitcoin emerged as the first asset to reflect the pricing of the Iran war, as it was the sole liquid market available when the U.S. and Israel initiated their attack on a Saturday, just a few weeks ago. It experienced a decline of 8.5% on that day. Two weeks later, it has surpassed gold, the S&P 500, Asian equities, and the Korean stock market. Only oil and the dollar have performed better, and both are direct beneficiaries of the conflict itself. Bitcoin’s safe-haven status — a notion that was contested amid late last year’s price lull — appears to be re-emerging in investors’ considerations. Furthermore, it functions as the swiftest shock absorber in global markets, as escalations intensify while drawdowns diminish. The pattern emerges more distinctly when examining the locations where bitcoin attracted buyers following each sell-off. On February 28, the day of the initial strikes, it reached a low of $64,000. On March 2, following the impact of Iran’s retaliatory missiles on Gulf states, the floor was $66,000. By March 7, following a week of ongoing conflict, the low reached $68,000. Following the tanker attacks on March 12, it reported a total of $69,400. Following the events at Kharg Island on Saturday, the low recorded was $70,596.
The trendline of higher lows has been ascending by approximately $1,000-$2,000 per event, narrowing the range from below, while $73,000-$74,000 remains a ceiling that has now rejected bitcoin on four occasions. That compression must ultimately find resolution. Either the floor catches the ceiling and bitcoin breaks above $74,000 on the next attempt, or the pattern breaks, and a larger escalation finally overwhelms the buying. The most notable aspect is how bitcoin has performed in comparison to other assets during the same two-week period. Since the onset of the war, oil prices have surged by over 40%, as illustrated in the chart below. The S&P 500 has experienced a decline. Gold has experienced significant fluctuations in both directions. Asian equities experienced their most challenging week since March 2020. Despite this, it does not imply that bitcoin has become a safe haven, as it continues to react to every headline. However, it rebounds more swiftly with each instance, and every recovery maintains a higher threshold. The difference with earlier this year is striking. In early February, a sudden liquidation cascade resulted in the loss of $2.5 billion in leveraged positions over a single weekend as bitcoin fell to $77,000, erasing approximately $800 billion in market value from its peak in October.
That episode appeared to be the sort of occurrence that could undermine market confidence for an extended period. Instead, it seems to have eliminated the weakest participants and recalibrated positioning, resulting in a more streamlined market that has managed to absorb every war headline since without experiencing that level of forced selling again. The macro overlay provides additional context, in the meantime. Trump stated late Friday that he spared oil infrastructure on Iran’s oil-producing Kharg Island “for reasons of decency,” but would “immediately reconsider” if Iran continued to block the Strait of Hormuz. Iran stated that any assault on energy infrastructure would provoke retaliatory actions against U.S.-affiliated facilities.
The emergence of that conditional threat is unprecedented, and should it come to fruition, the supply disruption that the IEA has already identified as the largest in history will significantly intensify. However, bitcoin’s adaptation to the war reveals to traders insights about the evolution of this market. It is neither a sanctuary nor solely a speculative investment. It has evolved into a continuous liquidity pool that mitigates shocks more swiftly than any alternative, as it remains the sole entity trading when these shocks occur.