Bitcoin (BTC) rebounded to $105,000 on Wednesday, falling briefly to $103,000. This recovery will gradually push global markets into risk-off mode as tensions in the Middle East rise.
Meanwhile, traders and investors are aiming to determine interest rates for the FOMC (Federal Open Market Committee) later today. This is a US economic indicator that could move through the market.
Iran’s threat to blockade of Straits of Hormuz causes fear of an oil shock
The surge in prices came amid growing fears about the oil shock. These fears come after Iran announced that prior approval of all oil and LNG tankers passing through the Strait of Hormuz, a narrow chokepoint that handles nearly 20% of the world’s oil trade.
Iran’s move escalates geopolitical risks in already unstable regions. The general perception is that the Strait of Hormuz movement is part of a broader strategy.
Defence Intelligence, a popular account for X (Twitter) that tracks international issues, extremists and politics, says Iran’s most powerful weapon is not missiles, but its ability to close the Strait of Hormuz and undermine world trade.
According to political commentator Brian Classenstein, the move does nothing to lower gas prices. Furthermore, it does not encourage FOMC to cut interest rates.
This perspective is attributed to the expectation that supply could still increase. Reuters recently reported that OPEC+ is expected to increase by 411,000 barrels daily in July.
“The larger oil demand in the OPEC+ economy, Saudi Arabia in particular, could offset additional supply from the group over the coming months and support crude oil prices,” Reuters reported, citing Capital Economics analyst Hamad Hussain.
However, others disagree with the possibility that the oil shock may be on the timer. Analysts warn that oil prices could skyrocket if the Strait of Hormuz is closed completely.
“An attack on Iran’s oil production or export facilities will raise the price of Brent crude to $100, and the closure of the Strait of Hormuz will lead to prices in the range of $120-130,” CNBC quoted Andy Lipou, president of Lipou Oil Associates.
This is in line with JPMorgan’s forecast that disruptions in Iran’s ability to supply global markets could surge oil to $120 and push CPI inflation to 5%.
Turning to the Fed with Bitcoin as a hedge and gold volatility climb
While traditional markets have digested the significance of a global supply chain shock, Bitcoin has regained its $105,000 threshold. Beincrypto data shows that BTC was trading at $105,299 at the time of this writing.
Pioneer’s crypto benefits from perceptions as a hedge against inflation and geopolitical uncertainty, but gold prices see an increase in volatility as traders turn to hard assets.
Bitcoin and gold price performance. Source: TradingView
Bitcoin and Gold are seeing new demand for safe havens as energy costs threaten to overcome global consumer prices.
The bounces, which ranged from $103,000 to $105,000 on Tuesday, remained firmly in the Bitcoin price within the monthly range of $100,000 to $110,000, according to analyst Daan Crypto Trades.
“The total displacement of ~10% (low to high) is the smallest range we’ve seen in a month,” the analyst wrote.
The timing of Iran’s announcement is important. The US FOMC is scheduled to make its next interest rate decision later today, presenting this week as its most important US economic indicator.
Based on the CME FedWatch tool, traders do not expect immediate rate changes. Nevertheless, investors will closely watch Fed Chairman Jerome Powell’s speech on signs of plans to deal with persistent inflation amid the geopolitical turmoil.
FOMC’s interest rate reduction probability. Source: CME FedWatch Tool
As reported by Beincrypto, the market remains tense. Crypto investors have volatility as the Fed fights against inflation and avoiding market panic.
When oil is weaponized and the crypto market reacts in real time, we can test Bitcoin’s resilience again, especially if the energy market becomes even more spiral or the Fed informs of the Hawkish’s tilt.
