Crypto prices fall after Iran's missile strike on Israel. Can Bitcoin really be a safe haven for investors?

The price of Bitcoin saw a 4% drop following the intensfying fight between Israel and Iran. But what does bitcoin have to do with the conflict in the Middle East and is this something we should be concerned about?

Direct impact of the geopolitical crisis on Bitcoin

The New Israeli attacks on Lebanon and the Iranian response with more than 180 missiles did not leave the crypto market indifferent. After the news broke out, Bitcoin suffered a 4% drop on October 4,2024. The price fell to $60.282, before rebounding above this treshold to climb above $62,000 on October 6.

This has once again shown Bitcoin's increased sensitivity towards geopolitical events compared to traditional markets.

Why did Bitcoin fall after the attack

According to financial market strategist, Li Xing, the conflict between Iran and Israel, prompted many investors to bet their money on Gold instead of Bitcoin, thereby increasing the price of Gold in the broader market.

Jeroen Blokland, the creator of the Blokland Smart Multi-Asset Fund is among many who have advocated for this theory, speculating that investors could be selling their Bitcoin assets in order to purchase Gold.

Prospects of Bitcoin look promising

Despite this decline, experts agree that the long-term outlook of Bitcoin seems promising. The U.S Federal Reserve (Fed) has hinted that interest rates will remain low in 2024, thus creating a favorable environment for risky assets like cryptos. Therefore, accommodative monetary policies from the Fed and the People's Bank of China could well support Bitcoin until 2025, as these two economic powers continue to stimulate global liquidity.

Moreover, the $6 billion expected in repayments to FTX customers should also contribute to an improvement in market liquidity. This potential capital injection could offer a respite to Bitcoin and other cryptos, as investors might choose to reinvest these funds into these assets. When combined with the historical impact of the U.S presidential elections, often followed by a rise in Bitcoin prices, the prospects for the flagship crypto remain optimistic.

Despite the immediaet volatility cause by the geopolitical conflict, Bitcoin's long-term trajectory still seems promising, driven by favorable global monetary policies and expected liquidity injections. Nevertheless, developments on the Israeli-Iranian front may continue to shake markets in the short term. Bitcoin remains an intrinsically volatile asset, but global economic fundamentals could well work in its favor in the coming months.