(Bloomberg) — Bitcoin advanced on Monday, with some advocates once again touting the digital asset as a potential inflation hedge, as trepidation over a prolonged war in Iran sent oil prices surging and stocks and bonds lower.
The original cryptocurrency rose nearly 3% to trade around $69,000 in New York, with smaller tokens like Ether and Solana gaining as well. Markets have been rocked as the conflict in the Middle East showed no signs of easing, pushing oil past $100 a barrel and stoking concerns about an inflation crisis.
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“Oil’s rally and the inflation concerns it raises have put Bitcoin’s hedge credentials back in focus,” said Jake Ostrovskis, head of over-the-counter trading at Wintermute. “What’s notable here isn’t just the macro backdrop – it’s that Bitcoin held firm and moved higher at a moment when most traders expected the opposite. That kind of price behavior, holding strength against a risk-off catalyst, is exactly what tends to attract attention from investors reconsidering their inflation play book.”
Bitcoin backers have long argued the token can act as a hedge against rising consumer prices because its supply is capped, meaning it can’t be devalued by a government or central bank. But the cryptocurrency has often traded in line with equities, raising questions about that narrative during past bouts of market stress.
So far this month, Bitcoin has outperformed gold, which is widely recognized as an inflation hedge. Since the day before strikes, gold has fallen around 3%, while Bitcoin is up more than 5% in the same period. Until last week, the trend in recent months had largely been the opposite, as bullion repeatedly hit record prices while Bitcoin tumbled.
“The main thing that will weigh on it is the recent rally, this will let some people cash out and cover costs associated with market tumult,” said Adam McCarthy, a research analyst at Kaiko. “This is what you see with gold too during crisis moments, people sell it as it’s in demand as a hedge and this can weigh on price action in the short run.” He added that he expects Bitcoin to trade higher again in the coming weeks.
Many traders appear to be pessimistic about a sustained crypto advance. US-listed spot Bitcoin exchange-traded funds have seen nearly $6 billion in net outflows since November, according to data compiled by Bloomberg, with flows turning negative again at the end of last week.