- Bitcoin (BTC) remained within the $100K-$110K range amidst geopolitical tensions.
- QCP Capital cautioned about the potential impact of the war on inflation and risk-on markets.
The ongoing Israel-Iran conflict has reached its sixth day, with Bitcoin holding above $100K. However, uncertainty looms over the market direction due to the U.S. threat to join the war.
Experts have warned that escalations could lead to inflation and negatively affect risk sentiment later in the year.
BTC: Balancing between inflation and geopolitical tensions
In a recent market update, QCP Capital, a crypto trading desk based in Singapore, highlighted the dual risks faced by Bitcoin from the ongoing conflict and inflation.
The trading firm emphasized that a resolution to the Israel-Iran dispute could significantly impact BTC’s stability.
Specifically, analysts at QCP Capital cautioned that any disruption in the Strait of Hormuz could spike oil prices and disrupt risk markets.
“If Tehran feels pressured, a blockade of the Strait of Hormuz could lead to further inflation, adding strain to already fragile global macro conditions.”
On June 17th, the trading firm also warned of a potential global risk-off scenario if the U.S. intervenes in the conflict.
Concerningly, President Trump’s strong stance on Iran’s surrender was not easing market concerns about a diplomatic resolution.
Reports indicate a significant military buildup in the region, with key assets on high alert.
According to prediction platform Polymarket, the likelihood of U.S. military involvement in the Israel-Iran conflict before July has surged over 60%.
The odds are even higher, reaching 90%, for U.S. participation by August, indicating market expectations of potential escalation.
Source: Polymarket
The looming question is which direction Bitcoin will take and whether it will serve as a hedge or align with equity markets.
Bitcoin’s Future Trajectory
QCP Capital also noted that the conflict could influence the Federal Reserve’s decision on rate cuts in the latter half of the year.
Regarding this week’s Fed rate decision, the firm anticipates a steady rate but with a hawkish tone.
“We anticipate the Fed signaling a single rate cut despite market expectations of two cuts in 2025.”
According to QCP analysts, a revised rate cut outlook could have a negative impact on Bitcoin.
“Such a revision could weigh on risk assets, including Bitcoin and other digital markets.”
Bitcoin has been behaving more like equities than a safe-haven asset amidst the current geopolitical tensions and inflation concerns. Although Bitcoin is often touted as a hedge against inflation and wars, its correlation with stocks is stronger than with gold.
Source: The Block
The BTC Pearson Correlation reveals a -0.07 alignment with gold and a +0.61 correlation with the Nasdaq Composite, indicating Bitcoin’s behavior akin to a high-beta tech stock rather than a traditional hedge.
In terms of market positioning, there is a growing preference for bullish bets in the short term, as evidenced by the rising 25 Delta Skew for 1-week (8%) and 1-month (5%) options.
Despite a recent price drop from $108K to $103K, option traders anticipate a short-term rebound.
Source: Velo
Although the 6-month outlook has improved, it remains negative, reflecting a demand for bearish bets and hedging strategies for end-of-year options.
This aligns with QCP Capital’s warning about potential year-end risks if inflation surges.
Despite the prevailing Israel-Iran conflict and the looming U.S. involvement, Bitcoin has shown resilience. However, the impact of the conflict on inflation could pose challenges for risk-on markets and Bitcoin in the future.
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