As geopolitical tensions escalate in the Middle East, gold has surged towards its all-time highs, but Bitcoin has behaved more like a risk asset than a safe haven. Despite Bitcoin’s close proximity to its historical price highs, analysts argue that Bitcoin's performance in times of crisis remains more correlated with equities than with precious metals like gold.
Gold has always been seen as a safe-haven asset, and its price movement in recent months reinforces that perception. On Monday, the price of gold reached $3,450 per ounce, just shy of its all-time high of $3,500 recorded in April, according to data from TradingView. The yellow metal has gained a remarkable 30% year-to-date, fueled by factors such as rising inflation concerns, U.S. trade tariffs, and heightened tensions in the Middle East.
The most recent catalyst for gold's surge came after the Israeli missile strike on Iran on June 13, which further escalated geopolitical instability. In response, Bitcoin’s price dropped, highlighting the digital asset's failure to act as a safe haven in times of crisis, unlike traditional assets such as gold.
Gold’s price surge has been fueled not only by geopolitical factors but also by inflationary pressures, with gold acting as a hedge against inflation. Gold’s role as a store of value has been reinforced as investors seek safe assets amid volatile markets.
As reported by CBS News over the weekend, "Should additional data or comments made by economic officials indicate wider concern over inflation or interest rate policy, this price could very easily tip into new, record territory." This suggests that geopolitical tensions coupled with inflation could push gold's price higher still.
Bitcoin’s Sluggish Response: Still a Risk Asset?
While gold has seen significant gains, Bitcoin’s price has remained relatively subdued in comparison. As of the latest data, Bitcoin has gained only 13% year-to-date, trading 5.3% below its all-time high of $111,800, reached on May 22. This contrast highlights the fundamental difference between Bitcoin and traditional safe-haven assets like gold.
Tony Sycamore, an analyst at IG Markets, told Cointelegraph that Bitcoin is still primarily treated as a risk asset, much like U.S. equities, rather than a safe-haven asset like gold. "Bitcoin is behaving more like a risk asset at the moment. When U.S. equity futures rebounded strongly, Bitcoin also followed suit," Sycamore explained. "If Bitcoin manages to hold above support levels between $95,000 and $100,000, there's potential for it to retest the $112,000 record high and potentially move towards $116,000 and $120,000."
Sycamore's analysis suggests that Bitcoin could indeed see a rise if equity markets remain strong. However, Bitcoin’s response to geopolitical instability and economic uncertainty still falls short of that seen in gold, underscoring the cryptocurrency's vulnerability to risk-on sentiment in the markets.
Oil and Gold Perform Better Than Bitcoin
While Bitcoin has had some recovery following a sell-off triggered by Middle East news, analysts like Henrik Andersson from Apollo Crypto believe that in the short term, oil and gold are likely to continue their upward trajectory, while Bitcoin and equities may underperform.
“Oil and gold are likely to continue to move in the opposite direction to equities and Bitcoin,” Andersson told Cointelegraph. This highlights the different behaviors of traditional safe-haven assets compared to cryptocurrencies like Bitcoin, which are still seen as speculative assets rather than storehouses of value during periods of geopolitical turmoil.
Nick Ruck, Director at LVRG Research, also expressed concerns over Bitcoin’s shift away from the “digital gold” narrative. "Bitcoin's digital gold narrative is slowly fading as it struggles to mirror gold’s rally. Traders are focusing more on short-term volatility and liquidity conditions, making BTC more correlated to risk assets than safe havens," Ruck stated.
This viewpoint indicates that Bitcoin's status as a safe haven asset is being questioned, particularly as the asset’s volatility and liquidity concerns remain high.
The Role of Federal Reserve
With the U.S. Federal Reserve’s upcoming meeting and rate decision on Wednesday, markets are closely monitoring how the central bank’s stance on interest rates will affect risk sentiment. Currently, futures markets predict no change in rates at the upcoming meeting, with a 96.7% probability that the Fed will keep rates in the range of 4.25-4.50%.
Eugene Cheung, Chief Commercial Officer at OSL, noted that Bitcoin could regain momentum if risk sentiment shifts and investors start looking for alternative stores of value. “If risk sentiment shifts and investors look for alternative stores of value, Bitcoin could see renewed momentum in the coming weeks,” Cheung said. However, this largely depends on the Federal Reserve's actions and market sentiment in the wake of its policy decisions.
Despite Bitcoin's strong performance earlier this year, its response to inflationary pressures and geopolitical crises has been less than expected, leading to questions about its role as a safe-haven asset. If investors continue to treat Bitcoin as a speculative investment, its ability to serve as a store of value in times of crisis may remain limited.
The Future of Bitcoin as a Safe-Haven Asset
As geopolitical tensions persist and inflationary pressures mount, Bitcoin’s role as a hedge against these crises will continue to be questioned. While Bitcoin has gained significantly in the past few years, its behavior during periods of market uncertainty suggests that it may not yet be ready to fully take on the mantle of a safe-haven asset. The debate over Bitcoin's role in the broader financial ecosystem will likely continue, especially as more institutional investors and financial products like Bitcoin ETFs emerge.
While Bitcoin’s price may rise with increased institutional adoption, its volatility and reliance on speculative investments may still render it unsuitable as a true store of value. Conversely, gold’s status as a safe-haven asset continues to strengthen amid global economic uncertainty.
Bitcoin’s response to geopolitical and economic instability remains markedly different from traditional safe-haven assets like gold. Gold’s price surges as a result of rising geopolitical risks and inflation concerns, and Bitcoin continues to behave more like a risk asset, largely driven by speculative market sentiment.
The upcoming decisions by the U.S. Federal Reserve and the ongoing geopolitical unrest will likely play key roles in determining whether Bitcoin can ever truly claim its spot as a safe-haven asset. For now, Bitcoin’s future as a hedge against inflation and geopolitical tensions remains uncertain, with traditional assets like gold continuing to outperform in these areas.