Amid escalating conflict in the Middle East, Bitcoin initially sank but recovered on Monday morning. The original cryptocurrency went down about 4% to around $63,000 as the U.S. struck Iran on Saturday, and as of Monday is back up to about $69,000, according to Binance.
The latest global developments are reminiscent in some ways of 2022, when the Russian invasion of Ukraine brought the price of oil up, and when inflation surged.
“As markets open after a tumultuous weekend, there’s a great deal of fear that we may be staring down the barrel of a 2022-style energy shock triggered by Russia’s invasion of Ukraine,” said Nic Puckrin, co-founder of Coin Bureau. “Back then, Brent crude spiked above $120 a barrel, and inflation exploded.”
The latest volatility for Bitcoin follows the strikes by the U.S. on Saturday that killed Iran’s Supreme Leader Ali Khamenei, who had been in power for more than three and a half decades. Iran responded by firing missiles at Israel, and by attacking U.S. military bases in Kuwait, the United Arab Emirates, and Bahrain.
While the current turmoil invites comparisons to 2022, it should also be noted that other factors helped to drive the two-year “crypto winter” that began around the time of Russia’s invasion. Namely, the collapse of Bitcoin’s price also coincided with the implosion of FTX, TerraForm Labs, and other major crypto firms.
Iran, meanwhile, has a long history with crypto, especially when it comes to using it to avoid sanctions. A report from January by the blockchain analytics firm Chainalysis found that the Islamic Revolutionary Guard Corps facilitated more than $2 billion in money laundering, illicit oil sales, and the procurement of arms by using crypto.
Digital asset activity was certainly not quiet in Iran this weekend. Outflows from Nobitex, Iran’s largest crypto exchange, spiked 700% in the minutes following the first airstrike, according to the blockchain analytics firm Elliptic.
The U.S. offensive against Iran may have come as a surprise to some, but certainly not to those on prediction markets. Over half a billion dollars was traded on Polymarket on whether the U.S. would strike Iran, making it one of the most popular wagers in the history of the platform. Just like when the U.S. struck Venezuela, there are suspicions about insider trading. Onchain analysts have flagged six bettors who made about $1.2 million by correctly wagering on the U.S. attack on Iran.
