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War continues to rock markets, but an unlikely asset is emerging with SIGNIFICANT strength ⬇️

War Heats Up

Since war broke out 16 days ago, geopolitical tension has seemed to only escalate with each passing day. This has started to cause an increasing degree of volatility in financial markets, as well.

Given the location of the war, oil has become front and center. As geopolitical concerns ramp up, so does the price of oil.

As the price of oil continues to move higher, stock market volatility does as well (with a strong correlation). Tension up = Oil up = VIX up = Equities down.

Not only that, but this move in oil has also driven the bond market lower, too. As oil is a critical component to nearly all of modern life, higher energy prices feed into all facets of modern life.

Remember, bond yields move inversely to the price of the bond. As US Treasury yields climb (due to higher energy prices causing higher inflation), that means that US Treasury prices are moving lower.

So, to recap: the war has driven oil higher, bonds lower and the all-important stock market, lower.

What’s Going Up?

One would think that gold would be driven much higher on the escalating geopolitical tensions, but this is not actually what we’ve seen. Since the war broke out on February 28th, gold has actually gone down (by -7%)

This curious move lower in gold can be explained by two clear forces:

1. Higher interest rates make holding US Treasuries (relatively) more appealing, as gold has no interest associated with it

2. A stronger dollar (due to a safe haven bid and higher rates) generally pressures assets like gold

…and, you’d think it would pressure Bitcoin too. But it hasn’t.

Bitcoin’s Goliath Moment?

As the dollar has strengthened, bitcoin has moved higher alongside it. This is certainly paradoxical, but thinking it through, it makes perfect sense:

-As GCC countries face increasing Iranian bombardment, people and their capital flee. We’ve seen reports of capital controls emerging in GCC countries with banks allegedly blocking wire transfers. We’ve also seen things like the Dubai real estate have a third of its value simply vanish in a matter of days. What would you do if you were trying to flee war and take your wealth with you?

-Rising oil prices, like we’re seeing in the Middle East, are causing disruption to supply chains and can/will fuel global inflation concerns. As energy costs permeate economies, this will further erode the purchasing power of fiat currencies and drive demand for scarce assets like bitcoin.

In this environment, Bitcoin emerges as a potential hedge against inflation due not only to its hard-capped supply of 21 million coin (which contrasts with central banks' ability to print unlimited money to combat economic slowdowns caused by higher energy costs), but also due to investors fleeing traditional assets amid uncertainty.

Bitcoin, with its decentralized nature, borderless liquidity, and historical performance during inflationary periods, such as the post-2020 surge, emerges as a near perfect store of wealth in turbulent times like we see today.

And the market agrees:

-Bitcoin has outperformed gold by a whopping 18%

-Bitcoin has outperformed the S&P 500 by 16%

Is this bitcoin’s time to shine?

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