Oil and gold prices rose on Wednesday, extending the previous day’s rally, as cryptos fell after Iran’s missile attack on Israel ramping up fears about an escalation in the Middle East.
The crypto market plunged upon hearing the news. Nearly $248 million was wiped out in the first four hours of Iran’s attack. Bitcoin fell as low as $60,780 despite reaching highs of more than $66,000 over the weekend.
Leading investors decided to seek safety in gold and crude oil, which are both climbing, thus sparking discussion about the status of the cryptocurrency as a safe-haven asset.
Demand for gold, considered a go-to in times of uncertainty and turmoil, pushed the precious metal close to its $2,685 record.
Both main crude contracts jumped more than 5 percent at one point Tuesday. News of the launch rattled US and European traders and sparked a sell-off on most markets, though Asia fared slightly better.
Cryptos unlike gold are not safe haven
Precious metals analyst Jesse Colombo told his 169,000 X followers that Bitcoin and crypto always tank when there are geopolitical fears, unlike precious metals, before adding:
“That confirms my long-held belief that crypto is not a safe haven. It’s yet another risk asset just like high-flying tech stocks.”
Blockhead says that despite being touted as “digital gold,” Bitcoin has never quite earned the moniker. In August, it highlighted how Bitcoin acted more like stocks than gold when markets plummeted and carry trades unraveled. Bitcoin’s correlation with gold turned negative last month, breaking up the theory of the token as an economic hedge.
As BRN analyst, Valentin Fournier, explains, “Although Bitcoin is often labeled a store of value, it remains a highly volatile asset that reacts strongly to risk-off sentiment. In moments of sudden uncertainty, like last night’s events, Bitcoin experienced minor losses, while traditional safe-haven assets like gold appreciated.”
“This occurs for two key reasons,” Fournier continued. “First, Bitcoin was designed to be a superior store of value over the long term, rather than a stable short-term hedge, especially against other currencies that depreciate due to inflation.
“Second, as a relatively new asset with significant potential for appreciation, Bitcoin is still subject to considerable speculation, leading to greater price fluctuations compared to more established assets like gold.”
Market volatility and Middle East crisis
The market volatility follows Israel’s Prime Minister Benjamin Netanyahu’s warning that Iran will “pay”, after Iran fired around 180 missiles at Israel on Tuesday.
Iran said the barrage was in response to Israel’s “aggressive acts”, including the killing of Hezbollah leader Hassan Nasrallah. Israel says it’s sending “additional forces” to its ground operation inside Lebanon, which began earlier this week, and has told more villages to evacuate.
