Iran-Israel Crisis May Push Investors To ‘Trade Down’ In Support Of Bitcoin And Gold – JPMorgan
Key receivers
Gold prices rose more than expected due to a weaker dollar and falling Treasury yields. Despite the current negative correlation, Bitcoin is expected to follow the price trend of gold.
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Rising geopolitical concerns and the upcoming US presidential election are pushing investors into traditional safe-haven assets like gold, while Bitcoin faces selling pressure amid Middle East conflicts, particularly recent tensions between Israel and Iran.
Analysts at JP Morgan say rising global tensions and November's US election are intensifying what some call a “humble trade”, trading gold and bitcoin to hedge against a currency crash. However, recent market movements show different paths for the two assets.
“Rising geopolitical tensions and the U.S. election will strengthen what some investors call a ‘downside trade,'” analysts at GP Morgan Global Markets Strategy said.
Gold prices have rallied in recent weeks, approaching $2,700 an ounce on September 26. Analysts say this increase has led to a 4-5% drop in the dollar and a significant drop in real US Treasury yields. However, gold's appreciation has gone beyond what these factors alone suggest, indicating renewed interest in the metal as a safe haven.
CryptoQuant has highlighted historical trends where lower US Treasury yields have been associated with rising gold prices. “In 2008, when 13-week Treasury bill yields fell, gold prices rose from $590 to $1,900 an ounce in 2011.” The organization said. “The same trend is happening right now with gold rising from $2,000 to around $2,700.”
While gold has benefited from the current macroeconomic environment, Bitcoin has faced selling pressure amid rising Middle East tensions. US spot Bitcoin ETFs Bitcoin retreated below $62,000 following Iran's missile attack on Israel, sharply reversing an eight-day losing streak.
BlackRock's iShares Bitcoin Trust (IBIT) was the only fund to see net gains on Tuesday, taking in more than $40 million, according to data from Farside Investors. However, this was not enough to offset the outflows from other funds, resulting in a net outflow of more than $242 million into US spot Bitcoin ETFs.
Bitcoin and gold's countermoves have reignited the debate about Bitcoin's role as a safe-haven asset. As news of Iran's missile attack broke, the price of bitcoin fell more than 3% in 24 hours, dropping nearly $4,000 to $60,300. Meanwhile, gold prices rose 1.4% to $2,665 an ounce, near a record high.
The Crypto Fear and Greed Index dropped to 42 points from a neutral 50 points, indicating increased caution among crypto investors as geopolitical concerns intensify. Israeli Prime Minister Benjamin Netanyahu's vow to retaliate against Iran could further escalate tensions and lead to further market volatility.
While JP Morgan analysts see both gold and bitcoin in “bearish trade,” current market dynamics point to strong demand for gold as a safe haven amid geopolitical uncertainty. Bitcoin's recent price action and ETF outflows suggest that cryptocurrency may still be considered a risk asset by many investors, despite the currency's long-term potential to hedge against a collapse.
As global tensions continue and the US presidential election approaches, investors will continue to closely monitor the performance of both gold and bitcoin, as safe havens in the geopolitical landscape.
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