Could $75K Be Next for Bitcoin as it Outperforms Gold with Middle East Conflict?
With positive indicators for the Bitcoin network & decreasing geopolitical threats in the Middle East, Bitcoin’s price is expected to rise considerably. Bitcoin & Bitcoin’s primary competitor, Gold, are being watched closely as the Middle East Conflict continues to unfold.
Market participants are eager to observe the Gold & Bitcoin performance spread. Bitcoin’s price deviation from Gold price has gained a lot of prominence since the start of the FOMC Conflict. Bitcoin has also Outperformed Gold since last quarter 2022.
Investment Strategy Over US Iran Conflict
From February 28th 2023 – Bitcoin’s price was approximately $66,000. Bitcoin price spiked ~ 33% with a US Israel strike collision against Iranian assets. Bitcoin peaked $72,700 during the Middle East Conflict, while Gold was < $4,300.
Gold has faced steep losses of nearly 2% & < 10T in market cap alongside the precious metal market. Gold lost nearly 25% from its all time high & Silver is nearly at 50% from its all time high. Gold broke support & was viewed as top directional of the market.
This behavior has caused some traders to consider Bitcoin a digital hedge against geopolitical risk, which has caused an unprecedented, paradigm shifting evaluation of risk assets during a global crisis.
Macro Causes of Divergence
While Bitcoin and Gold are both affected by macroeconomic phenomena, they are affected in different ways. The current economic situation in the US has caused the dollar to stabilize and Gold to become less attractive.
This has become evident in the treasury yields. The Bitcoin spot ETFs had a net inflow of $95.18 million from March 16 to March 20, marking the 4th successive week of positive inflows. This shows a clear rotation of capital, and, in turn, shows decreased confidence in the Gold backed ETFs.
Market Reaction to the US-Iran Conflict
There had been targeted strikes against some Iranian troops, and in retaliation, Iran has closed the strait of Hormuz, which has caused the West to become more involved in the Conflict with Iran. The strait is the passageway for about 20% of the world’s oil.
This has created a lot of volatility in both the commodity and equity markets. The S&P 500 and The Nasdaq equity benchmarks have been affected. Their value decreased by 1% and 0.5% respectively, during these events.
Investor sentiment became more positive following President Trump’s announcement about U.S. diplomatic efforts with Iran, as well as the temporary ceasefire on attacks on Iran’s energy infrastructure.
Investors began buying higher-risk assets, which resulted in Bitcoin breaking the $70,000 mark. The other traditional assets, like Gold, did not benefit as much from the news and do not provide an adequate hedge in uncertain geopolitical situations.
Is $75,000 Bitcoin Price Target Within Reach?
Market analysts are looking at resistance levels around the $72,000 mark. If this is broken, then Bitcoin price targets of $75,000 will become possible. The price and other market sentiment indicators remain positive, which suggests overall strong demand. This geopolitical situation has created an opportunity for Bitcoin to provide an inflation hedge in the market and perform better than Gold.
The sustainability of this trend will be determined by the state of diplomatic efforts and the overall global liquidity. For the time being, Bitcoin is outperforming Gold in this uncertain market, and it will lead to unprecedented levels of trust in cryptocurrencies in the near future.
