bitcoin suffered a sharp drop on Saturday amid an alarming spike in geopolitical tensions. Following the news that Iran's fundamentalist rulers had launched a massive airstrike on Israel, the price fell from around $70,000 to $62,000 (a drop of more than 10%) while some altcoins plummeted by 15% or more . Crypto markets recovered slightly following reports that Israel and its allies shot down more than 99% of incoming drones, cruise missiles and ballistic missiles, but Bitcoin was still trading near $65,000 on Monday morning.
While the crisis appears contained, at least for now, the terrifying episode constitutes a new challenge to one of the cryptocurrency world's favorite narratives: that if the world goes to hell and countries collapse, Bitcoin will flourish as a store of value. . Instead, as demonstrated by the sudden price drop over the weekend, investors are more inclined to dump Bitcoin than buy it. Meanwhile, gold—which many see as the original and definitive store of value—increased at the height of the weekend crisis.
Admittedly, Bitcoin's flash crash was fueled by a wave of liquidations when traders, some of whom were leveraged 50x or more, were unable to cover their positions after prices first fell on war news, which caused even more sell-offs. In contrast to these short-term traders, there are many more people who own Bitcoin for the long term, and it's a safe bet that few of them sold or were even tempted to do so.
Still, this doesn't change the fact that amid the latest geopolitical crisis, more people chose to sell Bitcoin than buy it. The broader market treated Bitcoin as a risky asset to run away from in favor of traditional safe havens like gold, bonds, and the US dollar. Regardless of whether the broader market view is correct, that is what happened when Iran started firing missiles.
Although Bitcoin, at least for now, cannot claim to be an economic safe haven, this weekend's events show that crypto markets can serve as something more: an early warning signal. Unlike traditional markets, crypto exchanges operate 24 hours a day. Meanwhile, many people in the cryptocurrency world are closely following geopolitical developments. These conditions mean that cryptocurrency prices are among the first to respond to major news events, and when those events occur outside of market hours, they could serve as a good predictor of what will happen when the opening bell rings. No doubt, people are already working on trading algorithms to do just that.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
DECENTRALIZED NEWS
An ex-Amazon The engineer was sentenced to three years in prison for stealing $12 million from two crypto exchanges. (TechCrunch)
Prosecutors showed the Mango markets The hacker, who is on trial for stealing $110 million, searched the web for terms such as “elements of fraud” and “prescription.” (Bloomberg)
He IRS chiefThe criminal investigation unit said the agency is preparing for a significant increase in cryptocurrency-related fraud and evasion cases. (Cointelegraph)
Legal director and senior communications executive of the asset manager. world x, which tried unsuccessfully to become a player in the Bitcoin ETF space, are the latest to leave the company. (WSJ)
He SECOND launched an investigation against Elegant laboratories, known for its NFT partnerships with the NBA and NFL, but decided to dismiss the case. (Fortune)
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