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Israel-Palestine Conflict: Bitcoin and Gold’s Reaction to War Following Ukraine Invasion

Published October 9, 2023 11:47 AM
Teuta Franjkovic
Published October 9, 2023 11:47 AM

Key Takeaways

  • The Israel-Hamas conflict has not affected the Bitcoin market.
  • Regardless of local political unrest, cryptos can operate globally according to the fundamental decentralization idea.
  • Extended crises due to government borrowing or money printing may boost BTC’s appeal as an inflation hedge.
  • The Israel war’s impact on BTC price is uncertain, with traders drawing parallels to the uncertainty during the Ukraine conflict in February 2022.

The world has become more aware of the geopolitical tensions in the Middle East due to the recent Israel-Palestine conflict . While the unrest has wide-ranging effects, one aspect often considered a safe haven in times of unrest has remained unaffected: the stability of Bitcoin’s (BTC) price.

Adaptability of Bitcoin

Bitcoin has demonstrated resilience in its price despite the rising violence and the significant effects the conflict in the Middle East has had on the lives of both Israelis and Palestinians. The price of the digital asset fluctuated very little over the course of the weekend as the conflict developed. This went against some predictions and assertions people held.

BTC was trading at around $28,000 just hours after Israel formally proclaimed a state of war. This represents a 0.20% decrease in value over the last 24 hours.

In the past, big market reactions have frequently been brought on by geopolitical crises. Bitcoin, on the other hand, seems to be an exception to this trend, as it showed a similar pattern during the present crisis and was largely untouched during the brief Israeli-Gaza conflict  in 2021.

The Gaza Factor

Gaza has a population  of about two million people and has been severely damaged by the war. Although it would be expected to have some degree of Bitcoin adoption, due to its relatively tiny population, it is unlikely to have a significant impact on the market for cryptocurrencies worldwide.

Hamas, a Palestinian Sunni-Islamic fundamentalist organization involved in the conflict, has even asked for donations in Bitcoin  before, but the volume of these transactions was insufficient to have a meaningful impact on Bitcoin’s price. This begs the question of whether variables outside the scope of the conflict’s impact may be responsible for Bitcoin’s immunity to geopolitical instability.

The Financial Importance of Bitcoin

The financial importance of Bitcoin may be one reason for its lack of interest in the Israel-Palestine issue. Even if the tension has clearly caused personal misery and unrest, it is debatably not currently a financial concern on a global or cryptocurrency level.

Since it is a decentralized digital money, national economies and conventional financial institutions do not influence how Bitcoin functions.

However, it should be highlighted that the conflict’s financial effects are unknown for the foreseeable future. The length, cost, and potential means of funding the war could have an impact on cryptocurrency markets as well as other international financial markets.

One of the first reactions came from the crypto analyst Michael Van de Poppe, who expects  the market to be volatile this week. He asserted that it is likely that Bitcoin will continue to rise, possibly reaching $30,000 as global uncertainty grows.

According to on-chain analytics company Santiment , there has been a big shift in the Bitcoin market as over 10,000 $BTC have left exchanges, the greatest amount since September 7.

In addition, Bitcoin is trying to reach the $28,000 market value. The significance of utility cannot be understated, particularly in light of the recent decline in unique addresses.

War and Commodities Reemerging On the Crypto Radar

Bitcoin’s reaction might vary if the incident continues for a long time and costs the people concerned a lot of money. To pay for expenses, governments might resort to borrowing money or printing money, which could cause inflation and undermine trust in fiat currencies.

In such a case, interest in and investment in Bitcoin, sometimes touted as a hedge against inflation and economic instability, could surge. Bitcoin’s price might rise because investors use it as a store of value to guard against currency depreciation and economic uncertainty.

However, when it comes to price catalysts, traders in the Bitcoin and cryptocurrency markets believe that the majority of volatility is still to come due to the ongoing Israel war.

Crypto trader Jelle compared  this situation with the start of the war in Ukraine by saying he was unsure of what would happen to BTC/USD after the war in Ukraine in February 2022 because of Bitcoin’s response to that event.

Bitcoin, Gold and Oil

In the meantime, Mike McGlone, senior macro strategist at Bloomberg Intelligence, said traders are currently demonstrating a “risk-off tilt” towards Bitcoin.


McGlone mentioned  a macro asset phenomenon that was developing, with gold up 1% on the day and Brent crude up 3.25% ahead of the opening of Wall Street.

In a Pavlovian reaction to the conflict between Israel and Palestine, gold prices  jumped. As investors hurried to invest in safe havens like gold, bonds, and US dollars, the yellow metal acquired luster.

Today’s session saw a rise in gold of around 1%. In challenging times like these, gold might be a beneficiary if it turns into a regional war with the involvement of other nations and any disruptions to the oil supply.

Popular trader Skew described  BTC price behavior as “illiquid and choppy,” adding that “markets are reacting quite defensively,” pointing to a fresh rise in the U.S. dollar index (DXY), which was up 0.4% on its own.

The DXY index reached its highest levels last week since late 2022.

Russia – Ukraine War Comparison

Digital tools have substantially impacted the battle in Ukraine. It is one of the most extensively documented military operations in history and the first significant cyberwar  between two nations. The war has also featured the widespread use of crypto.

According to Elliptic , a blockchain analytics company, as the conflict enters its second year, more than $212 million worth of cryptocurrencies have been given to support pro-Ukrainian war operations. This includes the direct transfer to the Ukrainian government of almost $80 million in cryptocurrency.

Various war activities have reportedly been funded with cryptocurrency, according to Ukrainian officials and government fundraising websites. The products bought vary from helmets and protective vests to drones and demining tools. Other cryptocurrency donations have gone towards purchasing radios and medical supplies as well as infrastructure.

On the other hand, reports from Chainalysis  show there were volunteer organizations and their followers who have used social media to crowdfund the procurement of weapons and disseminate misinformation by asking for cryptocurrency donations. The report has shown these groups have received over $2.2 million in cryptocurrencies, mostly in the form of Bitcoin and Ether donations. Tether, Litecoin, and Dogecoin have all been sent in sizable amounts as well.

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