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Since the onset of the conflict in Iran, Bitcoin has surpassed the performance of precious metals and U.S. equities, alleviating sentiment following a challenging start to the year.
Tehran, Iran. (Photo by hosein charbaghi on Unsplash/Modified by CoinDesk)
What to know:
Since the conflict’s inception, Bitcoin has increased by 3.5%, whereas traditional “safe havens” like gold and silver have experienced declines of 5% and 12%, respectively.
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The resurgence of the “Coinbase premium” along with consistent spot ETF inflows indicates that significant U.S. investors consider current price levels an appealing entry point.
This upward trend is bolstered by a “cleaner” market; recent statistics reveal that high-risk, leveraged positions have been eliminated, paving the way for more stable, demand-driven activity.
The outbreak of war in the Middle East has unsettled global markets, yet Bitcoin has exhibited unexpected behavior: outperforming stocks.
The disparity has grown over the last 24 hours, with Bitcoin climbing more than 2.5% while U.S. equity futures remain negative. WTI crude briefly spiked to about $116 per barrel early on Monday, reflecting a rise of approximately 60% since the conflict began. However, statements from G7 leaders regarding a potential release of oil reserves helped temper the surge, leading crude to retreat to around $100 per barrel.
In the meantime, the U.S. dollar has strengthened, with the DXY index increasing more than 1% to just above 99. Treasury yields have also risen, with the U.S. 10-year yield moving from just below 4% prior to the conflict to around 4.2%.
Bitcoin’s strong performance follows weeks of a significant sell-off that saw prices nearly halved from around $60,000 after reaching a record high exceeding $126,000 in October. With sentiment already precarious at the onset of the conflict, many anticipated that the downturn would deepen rather than reverse. Instead, the market has acted in its characteristic manner: catching the consensus by surprise.
Tracking tech stocks
Despite Bitcoin’s relative strength, it continues to show correlation with technology stocks. The iShares Expanded Tech Software ETF (IGV), a widely recognized benchmark for the software sector, has gained approximately 7% since the conflict began after bouncing from about $76 to close Friday near $88.
Signals from the derivative market may indicate stabilization. Open interest in coin-margined futures, which reflects the total value of outstanding contracts settled in Bitcoin rather than dollars, has decreased, suggesting that leverage is being removed from the market. Funding rates, which are periodic payments exchanged between long and short traders in perpetual futures, remain negative at around -3.5%, indicating that short sellers are compensating longs, a sign that bearish positioning is still prevalent.
Simultaneously, the Coinbase premium has reemerged. This metric measures the price discrepancy between Bitcoin on Coinbase and offshore exchanges and is often regarded as an indicator of U.S. institutional demand. Its resurgence, coupled with spot ETF inflows, implies that institutional buyers may be re-entering the market and finding demand at these oversold price levels.
