Bitcoin dumps as Biden supports Israel hitting Iran oil facilities

Bitcoin and altcoins continued their downward trend while crude oil prices jumped as the odds of a wider crisis in the Middle East rose.

Bitcoin (BTC) retreated below $60,000 for the first time since Sep. 16 after Joe Biden hinted that he would support Israel hitting Iranian oil facilities, per Barrons. Other altcoins, like Ethena (ENA), Conflux (CFX), and Beam (BEAM), tumbled by over 15%, making them the worst performers in the top 100.

Meanwhile, crude oil bounced back, with Brent and West Texas Intermediate surging by over 4% to $76.5 and $73, respectively. American indices like the Dow Jones and Nasdaq 100 reversed earlier gains and dropped by over 50 bps. 

Biden’s statement raises the stakes for a wider conflict in the Middle East. A report by the New York Times cited senior Israeli officials who said that the country was prepared to go to war with Iran. Polymarket traders see a 63% chance that Israel will attack Iranian oil this month. 

A prolonged war in the Middle East would have a major impact across all asset classes, including cryptocurrencies.

It would increase oil and gas prices because Iran exports over 1.3 million barrels a day. Also, because of the Red Sea’s importance in the shipping industry, it would lead to supply chain interruptions.

Higher inflation would then impact the ongoing interest rate cycle by the Federal Reserve and other central banks.

Bitcoin holds well in periods of crisis

In a recent note, three Blackrock analysts wrote that Bitcoin holds better than other assets in periods of geopolitical issues.

They cited six major events, including the US and Iran escalation, the COVID outbreak, 2020 US election challenge, Russia’s invasion of Ukraine, US banking crisis, and the yen carry trade unwinding. In all these events, Bitcoin did better than the S&P 500 index and gold in a 60-day period. 

S&P 500, gold, and Bitcoin performance through major events | Source: Blackrock

Blackrock also noted that Bitcoin had more potential catalysts that could push it higher in the long term. The most notable ones were the US debt dynamics, its long track record of outperformance, its uncorrelated asset status, and its 21 million supply cap.

Other analysts, including Michael Saylor, have noted that Bitcoin will ultimately become a hedge against inflation.