Commentators were quick to link Friday's bitcoin price bounce to the US airstrike on a top Iranian general. The real reason is more mundane.
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- The bitcoin price surged $538 (+7.8%) on Coinbase overnight and into the morning, pulling back at noon Friday morning.
- Commentators were quick to link the sudden spike to the U.S. airstrike that killed Iranian General Qasem Soleimani.
- Are we beginning to see the bitcoin price factor in geopolitical risk? Not likely in this case anyway. Here’s why.
The bitcoin price made a swift advance from a 16-day low at $6,853 around 9 pm Eastern Time Thursday night. It reached $7,391 on Coinbase just before noon on the East Coast Friday. that killed a ranking Iranian general in Iraq.
Secretary of State Mike Pompeo said on American lives in the region. .
Bitcoin Price Watchers Point to U.S.-Iran Conflict
A crypto and blockchain contributor at Forbes . The article cited Matthew Graham, chief executive of Sino Global Capital, who asked:
Do we think bitcoin is moving in reaction to geopolitical risk? Fascinating.
Goldbug and crypto bear Peter Schiff of Euro Pacific Capital drew the same conclusion. Of course he phrased his assessment of the correlation as a disparagement of bitcoin:
The bitcoin price and Iraq airstrike dots are right next to each other on the timeline. But that doesn’t necessarily mean they’re connected. It’s just as likely a coincidence as it is a correlation.
Bitcoin and Geopolitical Risks
The ICBM breakthrough may have put more of the U.S. mainland within Kim Jong Un’s cross hairs. South Korea confirmed the announcement. after the rocket test.
Over the next four days the bitcoin price slid nearly $800 from just below the $7,300 handle to $6,500. It crashed below the $7,000 level for only the second time since last May.
So within the last month it’s apparent that other factors than geopolitical risks are more heavily weighted in bitcoin’s price.
Bitcoin was in the middle of one of its most exuberant bull markets the last time U.S.-Iran tensions flared in June 2019. There were the same worries over an armed conflict .
But hedging against the risk of conflict with Iran was the furthest thing from crypto investors’ minds at the time. . The tech giant’s move into the crypto space was a resounding validation of bitcoin’s value.
And . As Jehan Chu, co-founder of Kenetic Capital, which invests in blockchain start-ups told CNBC:
The price surge is due to two major factors, one is an increasing consensus among the investment community that bitcoin is a legitimate store of value for the digital age, and two Facebook’s Libra cryptocurrency launch has forced every CEO to take crypto seriously.
The Real Reason BTC Climbed
The more likely reason BTC did climb is not that fascinating. It bounced off key support at $7,000. That’s it. By early afternoon Thursday Eastern Time, before markets had heard of any airstrike in the Middle East, :
It’s likely that traders anticipate a bounce at $6,800 and many will watch to see if the $7,100 support flips to a point of resistance. On the 6-hour chart, the relative strength index (RSI) has dropped into oversold territory at 30 and the Stochastic RSI has already begun to cross above 0 so it seems an oversold bounce is already in the making.
The bitcoin price didn’t jump because some preppers piled in over WWIII fears. It just got oversold and traders bought the dip.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.
This article was edited by Sam Bourgi.
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