- BTC remained range-bound within $100K-$110K amid geopolitical tensions.
- QCP Capital warned that the war could lead to inflation and affect risk-on markets.
The Israel-Iran war has entered its sixth day, but Bitcoin [BTC] has stayed above $100K. However, the market direction remains uncertain amid the U.S. threats to join the war.
Besides, market experts have cautioned that escalations could weigh on inflation and dent risk sentiment later in the year.
BTC: Cornered between inflation, missiles
In a Wednesday market update, Singapore-based crypto trading desk QCP Capital stated that BTC faced a double-tail risk from the war and inflation.
According to the trading firm, an elusive solution to the Israel-Iran conflict could keep BTC on edge.
In particular, QCP analysts cautioned that interference with the Strait of Hormuz, a key global oil shipping corridor, could spike oil prices and exacerbate risk markets.
“If Tehran feels cornered, a disruption or full blockade of the Strait of Hormuz becomes a credible tail risk. This would likely trigger another inflationary spike at a time when global macro conditions are already strained.”
On the 17th of June, the trading firm warned of a likely global risk-off move if the U.S. joins the conflict.
Worryingly, President Donald Trump’s hawkish tone for Iran’s ‘unconditional surrender’ wasn’t offering market relief for a mediated deal, as of press time.
In fact, reports have shown significant U.S. military equipment moving eastwards, with key Middle East assets put on a high alert.
According to prediction site Polymarket, the odds of the U.S. joining the Israel-Iran war before July jumped over 60%.
The chances spiked higher to 90% for a similar move by August. Put differently, the markets highly expected a likely U.S. involvement.
Source: Polymarket
This begs the question: which way will BTC go, and will it act as a hedge, or will it follow equities?
Bitcoin’s next path
QCP Capital also noted that the conflict could push the Fed to hold off on a rate cut in the second half of the year.
For this week’s Fed rate decision, the firm added,
“We expect the Fed to hold rates steady but strike a hawkish tone. Markets currently price in two rate cuts in 2025, but we believe the Fed may signal just one.”
Per QCP analysts, such a revised rate-cut outlook could weigh on BTC.
“A revision like this could weigh on risk assets, including $BTC and broader digital markets.”
Meanwhile, BTC acted like equities rather than a risk-off hedge asset. BTC has been touted as the best alternative hedge against wars and inflation. However, at press time, it was more positively correlated to stocks (risk-on) than gold (risk-off).
Source: The Block
Per BTC Pearson Correlation, the digital asset had a -0.07 correlation with gold and +0.61 alignment with the Nasdaq Composite. In short, it was acting like a high-beta tech stock rather than a hedge.
On the BTC market positioning, there was a premium for calls (bullish bets) in the near term as shown by rising 25 Delta Skew for 1-week (8%) and 1-month (5%) tenors.
Simply put, option traders expected a rebound in the short term despite a drop from $108K to $103K.
Notably, the 6-month tenor (yellow) also improved but was still negative, underscoring the demand for puts (bearish bets) and hedging activity for end-year option expiry.
This echoed the potential end-of-year risk if inflation spikes, as painted by QCP Capital.
Overall, BTC remained resilient despite the ongoing Israel-Iran war and potential involvement by the U.S. But the potential impact of the war on inflation could dent risk-on markets and BTC later in the year.
