In an unexpected twist, top crypto analyst Cyclop suggests that geopolitical conflicts, such as the current crisis between Israel and Iran, might inadvertently bolster the performance of digital assets. This comes despite a recent sell-off that trimmed around $140 billion from the crypto market.
Despite short-term volatility, Cyclop’s comprehensive analysis paints a more hopeful picture for the future of the broader crypto industry.
Cyclop recently shared on X (previously known as Twitter) that historical data suggests geopolitical unrest frequently precedes bullish trends in cryptocurrency. Referring to specific events from April and October 2024, he highlighted that Bitcoin (BTC) initially fell by 18% and 10% respectively amidst these conflicts, before bouncing back with remarkable gains of 28% and 62% soon after.
He reasons that these patterns represent a recurring cycle where conflict-related dips in crypto prices ultimately give way to significant growth. His argument is backed up by the below chart.
While geopolitical tensions may instigate short-term bearish movements, the overarching influence appears to be beneficial for digital currencies. Cyclop argues that as conflicts stoke fears of inflation and instability, traditional finance investors increasingly turn to crypto as a safeguard against weakening fiat currencies.
Unlike regular bank accounts, cryptocurrencies are immune to freezing, a factor that makes them attractive during periods of geopolitical turbulence. Digital currencies are increasingly being considered as a form of “digital gold,” a safe harbor in stormy times.
Current market dynamics mirror past events like the Russia-Ukraine conflict and US-Iran tensions in 2020, which also witnessed temporary declines followed by recoveries. Cyclop maintains that the current situation will result in similar outcomes, despite the usual summer lull in market activity.
Bullish sentiment is also supported by positive macroeconomic factors. Recent developments suggest that the US and China are working towards a compromise to ease tariffs and stabilize global supply chains, a move expected to temper inflation and boost investor confidence.
Moreover, the decision by President Donald Trump to postpone new tariffs has created a more risk-friendly atmosphere, enabling liquidity to circulate back into crypto markets. The latest CPI report, which showed a modest month-over-month increase of just 0.1%, further fortifies this positive outlook.
With annual inflation at 2.4%, slightly lower than the projected 2.5%, the Federal Reserve is now expected to cut interest rates twice by the end of the year. Historically, such rate cuts have been bullish for cryptocurrencies as they often lead to increased liquidity in the markets.
Although the immediate aftermath of the Israel-Iran conflict may pose challenges, historical data suggests that cryptocurrencies possess the potential to prosper in such conditions.
