2020 began on a positive note for the cryptocurrency market. Most representatives of the crypto industry significantly improved their positions. The positive dynamic was registered not only in altcoins but also in Bitcoin, which had managed to recover from $ 7200 and approached the resistance at $ 8500.
It is worth noting that the uptrend in BTC/USD, which we have been observing over the past few days, coincided with an extremely resonant fundamental event for all financial markets - escalation of tensions in the Middle East. Some might say that this is just a coincidence, however, we have a different point of view. In 2019, Bitcoin demonstrated recovery every time the prospects for global economic growth were overshadowed. At first, this was due to increased trade tensions between the United States and China. Then, market participants saw the inverted yield curve between the US short and long-term bonds and became concerned about an upcoming financial crisis. In both cases, along with a drop in investors’ interest in traditional risky assets, demand for Bitcoin increased. Based on this, we can conclude that BTC is more and more often considered by traders as a safe haven asset, which allows them to “sit out” global economic uncertainty.
Today, the global economy has faced another risk - the events in the Middle East with the United States and Iran as the key players. Last Friday, Qassem Soleimani, an Iranian Major General in the Islamic Revolutionary Guard Corps, was hit by the drone strike near Baghdad airport. Abu Mahdi al-Muhandis, an important Shia leader in the post-Saddam era, the key militia figure and a close Soleimani associate, was also killed in the attack. Following the airstrike and Soleimani death, Iran’s Supreme Leader Ayatollah Ali Khamenei vowed harsh revenge, in response to which US President Donald Trump threatened to strike more Iranian targets if Tehran takes retaliatory measures.
Unfortunately, the conflict between the countries escalated from verbal skirmishes to real action. The Islamic Republic of Iran responded to US aggression, launching 15 ballistic missiles at the US military forces based in Iraq. The likelihood of an open military conflict between Tehran and Washington has already boosted the entire category of safe-haven assets: US treasuries, Franc, Yen and Gold. Bitcoin was no exception and also proved itself as a safe haven and henge asset. In just one day, yesterday, the BTC/USD strengthened by 5% reaching $ 8350 mark.
All in all, turmoil in the Middle East is likely to keep its status as the main fundamental trigger that affects market sentiment. This will continue until the United States and Iran put an end to mutual aggression, which undermines the existing international order. In the meantime, we have a great opportunity to test the hedging properties of Bitcoin by opening long positions with the target at $ 9,000.