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(Bloomberg) -- Bitcoin has stabilized above $70,000 as markets recover after being roiled by the war with Iran, which has threatened to disrupt trade and drive up inflation.
The original cryptocurrency was trading above $72,500 at 10 a.m. on Thursday in Singapore, dropping as much as 1.4% after advancing 8% on Wednesday during US hours.
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Earlier in the week, Bitcoin appeared stable relative to other assets, which saw significant selloffs as soon as markets reopened following US and Israeli strikes on Iran over the weekend. By Thursday, however, stocks were rebounding. Korea’s Kospi index jumped 11%, while Japan’s Nikkei 225 rose 4.2%.
“With macro uncertainty and escalating conflict in the Middle East, markets are increasingly pricing in expectations of more accommodative financial conditions,” said Gracie Lin, chief executive officer of the crypto exchange OKX SG. “When liquidity expectations shift, Bitcoin tends to respond disproportionately — which helps explain the strength we’re seeing at these levels.”
Richard Galvin, co-founder of hedge fund DACM, pointed to Bitcoin’s premium on Coinbase, which had reversed from a discount on Sunday, as indicative of returning bullish sentiment in the US.
In recent days, Bitcoin has even outperformed gold, to which the digital asset is often compared but seldom resembles. Since Friday, the day before the strikes, gold has fallen nearly 2%, while Bitcoin is up nearly 12% in the same period. Until this week, the trend in recent months had largely been the opposite, as bullion repeatedly hit record prices while Bitcoin tumbled.
Cryptocurrencies have failed to find a sustainable rally since a sharp selloff in October, just after Bitcoin hit a record price above $126,000. The token has since shed more than 40% of its value.
Investors had been fleeing to other assets until the new conflict in the Middle East, which left traders rushing to find a haven amid uncertainty around how long the war might last.
So far in March, investors have poured nearly $700 million into US Bitcoin exchange-traded funds, according to data compiled by Bloomberg.
“Sentiment is turning bullish again in the crypto world,” said Caroline Mauron, co-founder of Orbit Markets. “Trading could still be choppy given the geopolitical tensions and macro uncertainties, but the market appears to have turned a corner for now.”
