The global cryptocurrency market is seeing notable price changes as geopolitical tensions rise. On Wednesday, the market cap dropped to $2.13 trillion, reflecting a 1.26% decline.
Trading volumes also took a hit, with a 20.21% dip, reaching $91.96 billion. Many analysts are connecting these market movements to the ongoing conflict between Israel and Hamas, which began escalating earlier this month.
Crypto Market Comes Down Amid Israel-Iran Conflict
Popular cryptocurrency analytics site Santiment revealed a trend in cryptocurrency’s behaviour amid actual wars. Their most recent analysis states that when a conflict breaks out, bitcoin markets frequently see sharp declines that are followed by large rallies.
They emphasised the Israel-Palestine conflict, which started on October 7, 2023, in their analysis. During the first four days of the battle, Bitcoin fell 5%, but over the next nine days, it increased by 12%. In a similar vein, Bitcoin saw a 10% decline on its first day during the crisis between Russia and Ukraine in February 2022. It did, however, rise by 27% during the ensuing six days.
These past examples indicate that although cryptocurrency markets may respond badly at first to tensions throughout the world, they frequently bounce back swiftly and occasionally even see significant gains.
Crypto’s Complex Relationship with War
There is a complex relationship between cryptocurrency and international wars. The way a war affects digital assets relies on several variables, including how long the fight lasts, which countries are participating, and the overall geopolitical context.
Violence-related economic tensions can raise interest in cryptocurrencies, particularly in areas where the violence is a direct result. When traditional payment methods go down, users may occasionally resort to using digital currencies as a safer or more dependable option.
Conflict, though, can also increase uncertainty, which initially lowers the price of cryptocurrencies. Concerned about the long-term effects of international tensions, investors may decide to switch their portfolios to more conventional, reliable assets like government bonds or gold.
The Israel-Hamas Conflict and Crypto
The market for cryptocurrencies has been impacted by the continuing war between Israel and Hamas in both direct and indirect ways. Concerns exist around the usage of digital currency to finance militant groups in addition to market volatility.
According to a recent Wall Street Journal story, Hamas has been financing its operations with cryptocurrencies. Multiple digital wallets have been connected by Israeli officials to both the Palestinian Islamic Jihad (PIJ) and Hamas.
PIJ-linked wallets got an estimated $93 million in cryptocurrency between August 2021 and June 2023, compared to $41 million received by Hamas-linked wallets over the same period.
Concerns regarding the potential use of cryptocurrencies in international conflicts have been highlighted, leading to proposals for stricter laws on digital assets to stop non-state actors from abusing them. However, the decentralized nature of cryptocurrencies makes it challenging to put such restrictions effectively.