Bitcoin’s resilience during the latest bout of global macroeconomic stress is starting to draw attention on trading desks.
The largest cryptocurrency rose to just $71,000, up about 7% from Sunday night’s lows, even as geopolitical tensions rose over the Iran conflict and markets grappled with risks ranging from oil supply disruptions to strains in private credit markets.
That relative strength is starting to come into focus. The Nasdaq 100 and S&P 500 have remained more or less stable for the same time, while gold – typically a safe haven during turmoil – has posted only modest gains. Looking at performance so far in March, BTC is the only one of the three posting gains.
Bitcoin is also showing early signs of breaking its close correlation with troubled software stocks. Over the past five days, the BlackRock Spot Bitcoin ETF (IBIT) is up 3.75%, while the iShares Expanded Technology Software ETF (IGV) is down 2.45%.
The price action is making analysts cautiously optimistic that the cryptocurrency market may finally be stabilizing after months of declines.
Seller burnout
Aurelie Barthere, senior research analyst at Nansen, said an encouraging sign is BTC’s little reaction to new geopolitical headlines.
Earlier in the week, a brief wave of optimism boosted stocks and cryptocurrencies along with falling oil prices, suggesting markets were tentatively pricing in a possible de-escalation of the conflict with Iran. But as the session progressed, that optimism faded and risk assets gave up some of their gains.
“Bitcoin’s downside sensitivity has been relatively limited,” he said, noting that some traditional benchmarks like the Euro Stoxx index have fallen more sharply over the same period.
That resilience suggests that the bitcoin marginal seller may be less aggressive than the stock seller, Barthere added.
Changing correlation with gold
Another change that is catching the attention of traders is bitcoin’s changing relationship with gold.
According to Bryan Tan, a trader at cryptocurrency trading firm Wintermute, the BTC-gold correlation has turned positive, moving to +0.16 from -0.49 a week ago.
During the initial phase of the Middle East conflict, bitcoin fell while gold rallied in a classic risk-off move, Tan noted. More recently, both assets have risen together as the U.S. dollar weakened, suggesting investors may be starting to treat them as beneficiaries of dollar weakness rather than opposing risky trades.
“If this correlation continues with a positive trend, it will change the narrative around BTC in a conflict environment from ‘sell the risk asset’ to something more nuanced,” Tan said.
ETF flows are back
Improving bitcoin ETF flows may also be supporting the recent strength.
Bitcoin ETF flows had been trending negatively for months following the October peak. But data from the past two weeks shows notable improvement, noted Joe Edwards, head of research at Enigma, particularly with consistent inflows into BlackRock’s IBIT fund, the largest of the bitcoin ETFs.
A sustained recovery in ETF demand could be critical for bitcoin, he added. A sustained recovery in ETF demand could be critical, he added. Many analysts believe that bitcoin’s next phase of growth depends on access to deeper institutional capital pools, such as ETF investors in brokerage accounts. With this in mind, the recent wave of capital outflows was worrying, Edwards said.
The “good news,” he said, is that there are signs that period is ending.
IBIT has attracted nearly $1 billion in new inflows so far in March, after losing more than $3 billion between November and February, SoSoValue data shows.
If the trend holds over the coming weeks, Edwards argued, it could support a broader bitcoin rally in the second quarter.
