$BTC (-0,44%) has remained remarkably stable despite the geopolitical escalation surrounding Iran. While oil prices and volatility have risen significantly and stock markets have come under pressure, Bitcoin has risen by around 7% since the start of the conflict and has stabilized above USD 70,000.
This is remarkable in that Bitcoin has historically often served as a source of liquidity for selling during geopolitical shocks at the weekend. This time the market developed differently.
One important reason lies in the market structure prior to the escalation. Over the past five months, it is estimated that large market participants ("whales") have seen net outflows of around 30 billion US dollars. As a result, many speculative exaggerations have already been flushed out of the market. Valuation and leverage indicators had normalized significantly even before the geopolitical risk increased again.
The capital flow data also confirms this development. After five weeks of ETF outflows totaling around four billion US dollars, investment products on digital assets recorded net inflows of over one billion US dollars again in the first five days of March alone. Investors are therefore not retreating, but are increasing their allocation despite the uncertainty.
However, the macroeconomic environment remains difficult. Weaker labour market data in the US, rising energy prices and persistent inflationary pressure are limiting the US Federal Reserve's scope for rapid interest rate cuts. A combination of weaker growth and stubborn inflation is a difficult environment for traditional risk investments.
For #bitcoin however, it is precisely these factors that may become more relevant. Rising government debt, energy-driven inflation and the increasing politicization of the global financial system underscore characteristics of Bitcoin such as self-custody and independence from government issuers.
A phase of consolidation remains likely in the short term. A sustained breakout above USD 72,000 would be necessary to clearly brighten the technical picture. Nevertheless, the current market phase shows that Bitcoin is increasingly being perceived less as a fragile risk asset and more as a macroeconomic hedging instrument. (Author: James Butterfill, CoinShares' Head of Research)
With the CoinShares Bitcoin ETP $BITC (-4,02%) you can invest in Bitcoin.
