Bitcoin’s price dipped hard on Thursday as war in the Middle East escalated, sparking fears of an energy crisis, before rebounding.
Iran hit Qatar’s main gas plant, Ras Laffan, causing billions of dollars in damage. The strike came after the Federal Reserve on Wednesday dampened investor hopes of interest rate cuts later this year.
“We’re seeing a double-whammy for risk assets,” David Lawant, Anchorage Digital’s head of research, told DL News. “Crypto isn’t immune to these macro headwinds.”
Bitcoin dropped to under $69,000 per coin before rising slightly. CoinGecko data shows it was recently priced at $70,473, down 1% over a 24-hour period.
But how low could it go?
Temporary ‘decoupling’
Market analysts previously told DL News that the price of Bitcoin and other major coins would suffer because of the Iran war.
Bitcoin was doing well, spiking in price despite a dip in other risk-on assets. Analysts told DL News that it was temporarily “decoupling” from stocks. But it’s feeling the pain again as war rages on.
“Escalations in Iran have driven a sharp move higher in oil prices, and if sustained, this could begin to weigh on economic growth,” Matt Howells-Barby, VP of growth at Kraken, said in an investor note shared with DL News.
He added that Bitcoin was already feeling the strain, and the leading cryptocurrency could trade as low as $65,000 over the coming weeks if it fails to hold $69,000 now.
Sebastián Serrano, the CEO of Argentinian crypto exchange Ripio, told DL News that Bitcoin trading lower than $54,000 was realistic if the cryptocurrency experienced a continued selloff.
“[In March], Bitcoin reacted to a sequence of events that began outside the crypto market and were gradually transmitted into it,” he said.
“The move started with the escalation of the conflict involving Iran and energy infrastructure, which pushed oil prices higher and increased uncertainty around global inflation,” he continued, adding that macro repricing, particularly through interest rates and inflation, was hurting crypto markets.
What’s energy got to do with it?
Iran’s military spokesman last week warned the world should prepare for oil prices to double due to the war.
Analysts are now worried about oil prices getting out of control. JP Morgan Chase on Thursday cut its official S&P 500 forecast, noting a recession risk from oil shock.
Recent strikes — Israel hitting Iran’s South Pars gasfield on Wednesday and Iran retaliating by hitting Qatar’s Ras Laffan — have led market observers to forecast more inflation.
And with more inflation comes less chance of interest rate cuts, which restricts the liquidity that Bitcoin needs to surge.
Mathew Di Salvo is a news correspondent with DL News. Got a tip? Email at [email protected].