Should you shift your Bitcoin investment strategy on account of the recent escalating geopolitical factors?
- Exploring the potential Bitcoin price impact by recently rising political tensions. A look at similarities between now and 2022 and assessing differences that may lead to a different outcome.
Bitcoin’s [BTC] price action has had a variety of influences over the years. From economic influences to geopolitical exposure, but could the escalating geopolitical outcomes in the Middle-East impact Bitcoin?
Before we explore the potential Bitcoin impact, it is worth pointing out something. Conflict, especially of the physical nature, is against human progress, and we sympathize with those affected.
The threat of major geopolitical conflicts has widespread impact, especially on the markets.
Investors tend to be more reluctant to invest not just in Bitcoin, but also the broader risk-on investment landscape during times of conflict.
This was the case in February 2022 when the Russia-Ukraine conflict commenced. Bitcoin and the rest of crypto experienced significant outflows as the investment landscape switched to a cautious stance.
Will Bitcoin end up in a similar situation this time?
Bitcoin has already experienced significant outflows so far in the last five days, falling from $66,000 to its $60,450 press time.
Exchange inflows were at 10,278 BTC in the last 24 hours while exchange outflows were lower at 9,278 BTC.
Higher exchange inflows than outflows signaled that Bitcoin may dip below $60,000 towards the weekend if the sell pressure remains.
However, it is worth noting that both inflows and outflows have been slowing down for the last three days.
Source: CryptoQuant
It was unclear whether the volatile geopolitical situation had a hand in the market sentiment so far. This is because the sell pressure this week may also be the result of profit-taking from Bitcoin’s rally in September.
While it is possible that the rising tensions may impact Bitcoin by influencing sentiment, the current situation also happens to be a bit different.
BTC’s sell pressure in early 2022 had multiple factors hammering down on the cryptocurrency.
This was around the same time that governments were raising interest rates, hence liquidity was flowing out of the market much faster.
One of the biggest differences this time is that global liquidity is on the verge of growing courtesy of rate cuts. In other words, the dynamics are far much different this time.
Ultimately, geopolitical tensions may still have an impact in the short-run, but that impact may be diluted by the changing liquidity situation.
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