War and Algorithms: Reassessing the Value of Virtual Currencies in the Eye of the Storm

The fighting in the Strait of Hormuz has been ongoing for over a week, causing intense fluctuations in global capital markets amid the smoke and fire. As Iranian Revolutionary Guard speedboats cut through the Persian Gulf waters and U.S. aircraft carrier strike groups remain silently on standby in the Gulf of Oman, the cryptocurrency market is interpreting the deeper implications of this crisis in its own way.

Last weekend, the US-Israel coalition launched airstrikes against Iran, which immediately threatened to block the Strait of Hormuz—an energy artery responsible for about 20% of global oil transportation. Brent crude oil stabilized at $85, global shipping prices surged, and the shadow of supply chain disruption once again cast a pall over the world economy. Meanwhile, in the crypto market, Bitcoin briefly plummeted to $63,000, with over 120,000 investors liquidated within 24 hours.

This is not an isolated case. In mid-April 2024, amid tense Middle East tensions, Bitcoin experienced a single-day decline of 7.9%. Why, under geopolitical conflict, did Bitcoin not only fail to be sought after but instead crash sharply?

Li Ming, a researcher at Hong Kong Polytechnic University, pointed out that in emergencies, some need to sell Bitcoin for fiat currency; rising oil prices also prompted certain groups to liquidate assets for liquidity. More critically, high leverage in the derivatives market triggered a “death spiral”—once selling begins, falling prices cause massive margin calls and forced liquidations, further intensifying selling pressure. Zhao Binghao, a professor at China University of Political Science and Law, commented, “These movements are hard to explain as traditional ‘safe-haven assets,’ but rather resemble typical ‘risk asset deleveraging.’”

However, there is another side to the story. When panic selling subsides, Bitcoin quickly recovers, once approaching $74,000. Mercuryo, a crypto payment platform, noted that Bitcoin is acting as an “early warning indicator” for traditional financial markets. Market makers like Enflux observed that during geopolitical shocks, crypto assets tend to react faster than traditional assets—when bombs drop, funds seek exit routes, and Bitcoin becomes a “pressure valve.”

This has sparked deeper reflection on the “digital gold” narrative. Gold’s safe-haven attribute lies in hedging against financial system turmoil and inflation expectations; Bitcoin’s safe-haven role may be more aligned with sovereign credit risks such as currency collapse, capital controls, and account freezes. During Greece’s capital controls in 2015, local Bitcoin exchanges saw a roughly 400% increase in new customers; amid Venezuela’s long-term currency crisis, P2P trading activity ranked among the top in Latin America.

But experts warn that this safe-haven function is not a constant trait. Zhao Binghao pointed out that for Bitcoin to truly attain the status of gold as a safe haven, it needs to cross multiple thresholds: volatility must drop from the current 40%-70% to below 20%, derivatives leverage must be significantly reduced, and regulation must move toward greater coordination.

Meanwhile, macro variables are entering the game. The US dollar index strengthening above 99 puts pressure on high-risk assets. IG market analyst Tony Cicamore noted that ongoing geopolitical conflicts will bring high inflation and dollar appreciation, while reducing the likelihood of Fed rate cuts. Under this environment, Bitcoin’s upward momentum may be restrained. Currently, the probability of the Fed holding rates steady in March is close to 97.4%.

On-chain data reveal market divisions: addresses holding over 1,000 BTC increased during the conflict, while short-term holders became the main sellers. This structure indicates that Bitcoin is transitioning from a “retail speculative asset” to an “institutional allocation asset,” and the war’s impact is accelerating this process.

The fighting in the Strait of Hormuz will eventually subside in some form. But the reflections left by this crisis will resonate in the crypto market for a long time—Bitcoin is neither purely a safe haven nor simply a risk asset, but an evolving new species that shows different faces at different times and in different contexts. And this current storm is laying the groundwork for the next cycle. #2月非农意外负增长