As Israel declares a state of war against the Palestinian military group Hamas, the global crypto community finds itself grappling with uncertainty. Speculation is rife about how Bitcoin (BTC) and the broader altcoin markets will respond to this geopolitical crisis.
Historically, market volatility tends to surge during geopolitical crises, including wars and military conflicts. In such tumultuous times, investors often seek refuge in safe-haven assets like gold and oil, while moving away from riskier investments such as stocks and cryptocurrencies.
Renowned crypto analyst Miles Deutscher weighed in on the potential impact of the Israel-Palestine war on the S&P 500 index. He took to Twitter to express his thoughts, stating, “Data suggests that markets typically recover quickly from wars and other geopolitical shocks despite experiencing initial volatility.”
Deutscher’s analysis revealed a notable pattern. While there was considerable uncertainty during the first month of the conflict, markets tended to turn positive after approximately three months. In fact, in 75% of the cases examined, the S&P 500 index displayed positive performance 12 months after the onset of the military event.
This analysis considered military conflicts spanning from the Pearl Harbor incident in December 1941 to the Iraq war in March 2003. However, the cryptocurrency market has had limited exposure to significant geopolitical conflicts, with the Russia-Ukraine war being a notable exception. Consequently, it remains challenging to predict the isolated impact of such events on crypto assets.
Nonetheless, there is a noteworthy correlation between Bitcoin and the S&P 500 index. As a result, alongside the stock market, Bitcoin is also likely to experience heightened levels of volatility in the shorter term due to the ongoing Israel-Palestine conflict.
A Bitfinex Alpha report, shared with BeInCrypto, has underscored the expectation of increased volatility in Bitcoin’s price action. Historical data indicates that daily volatility in Bitcoin’s price remains above the 200-day exponential moving average (EMA).
Read More: Top NFT Developer Yuga Labs Restructures Amid Market Downturn
In the initial days since the commencement of the Israel-Palestine war, Bitcoin (BTC) has seen a decline of nearly 2%, according to data from TradingView. This decrease suggests that crypto markets are not immune to the fluctuations caused by geopolitical events and will likely continue to experience volatility in the coming weeks as the situation unfolds.
In conclusion, while the crypto community closely monitors the situation in the Middle East, it is bracing for potential turbulence in the markets. The historical correlation between Bitcoin and traditional financial markets suggests that the crypto sector may not remain insulated from the ongoing Israel-Palestine conflict’s economic repercussions. As events continue to develop, investors will be watching closely to gauge the impact on digital assets and the broader financial landscape.
