In a live practical lesson on the importance of geopolitics in the crypto world, we recently witnessed how a single political decision can shake the entire Bitcoin market within hours.

The Strait of Hormuz incident and its immediate impact

When President Trump issued his orders to blockade the Strait of Hormuz, Bitcoin suddenly dropped from higher levels to $70,741 in less than 24 hours. However, it quickly rebounded, indicating that buyers were waiting at weakness levels.

Why does Bitcoin drop during crises?

Many see Bitcoin as a safe haven like gold. But the reality is more complex: Bitcoin is currently correlated at 85% with the Nasdaq index during periods of rising oil prices. This means it behaves as a speculative asset rather than a safe haven in severe crises.

Oil prices and inflation confuse the calculations

The rise in oil prices above $104 per barrel has pushed U.S. inflation to 3.3% — the highest level since May 2024. This forces the Federal Reserve to keep interest rates high between 3.50% and 3.75%, which reduces liquidity in the markets and puts pressure on speculative assets like Bitcoin.

But institutions are not fleeing

Interestingly, Bitcoin ETF funds continued to attract positive flows even during this pressure. This indicates that institutional investors view the pullbacks as buying opportunities rather than reasons to flee.

Summary for the Arab trader:

Follow geopolitical news — especially any tensions in the Middle East — as they move oil markets, which in turn affects the dollar and interest rates, all of which reflects on Bitcoin.

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