A war between the US and Israel against Iran and its proxies is bullish for Bitcoin’s price, according to analysts at the London Crypto Club.
The analysts suggested two distinct scenarios stemming from the joint strikes on Iran on Saturday that killed Supreme Leader Ali Khamenei and unleashed waves of retaliation against the Islamic Republic’s Gulf neighbours.
“This might finally be the ‘narrative catalyst’ Bitcoin has been waiting for,” David Brickell and Chris Mills said in their weekly newsletter.
The optimistic forecasts come as Bitcoin trades 47% below its October peak of $126,000 while assets like gold and stocks have blazed new all-time highs.
The top crypto surged to over $69,000 after the strikes on Iran, but has since fallen back down to just under $67,000.
Investors purchased $458 million worth of Bitcoin exchange-traded funds on Monday in a strong start for the month of March, DefiLlama data shows.
Two Bitcoin rally scenarios
Brickell and Mills’ first scenario is one where the conflict evolves into a prolonged war. If that happens, the analysts expect it to unleash an “extreme risk-off scenario” where investors pile into Bitcoin to “hedge against the failure of existing economic and political structures.”
In this scenario, Bitcoin will out-perform the market alongside safe-haven asset gold, the pair said.
The second scenario is “a swift conclusion” where investors go on a Bitcoin buying bonanza after US President Donald Trump announces a peace deal, triggering a peace premium for the top crypto’s price.
Brickell and Mills stressed that either way, the Federal Reserve will inject more money into the financial system to support war efforts, thus boosting prices of risk-on assets like Bitcoin.
“Markets remain always a function of rates and liquidity,” they said.
“We maintain the view that risk sell-offs on war are typically very short lived as it leads to more debt creation and larger deficits, necessitating ever more liquidity,” they said.
To be sure, Brickell and Mills aren’t the only ones that predict war to be a positive catalyst for Bitcoin’s price.
Arthur Hayes, Maelstrom’s chief investment officer, made a similar call.
Hayes argues that every major US military adventure in the Middle East ends the same way — with the Federal Reserve printing more money — thus boosting the prices of assets like Bitcoin.
Hayes cited decades of data showing that US military campaigns, ballooning federal outlays, and subsequent Fed interest rate cuts have been positive market catalysts.
“The time to back up the truck and buy Bitcoin and high-quality [altcoins] like HYPE is immediately after the Fed cuts rates and or prints money to support the government’s goals in Iran,” he wrote.
“The longer Trump engages in the extremely costly activity of Iranian nation-building, the higher the likelihood the Fed lowers the price and increases the quantity of money,” Hayes said.
