Escalating tensions between the US and Iran have prompted a price surge price for bitcoin and other cryptocurrencies, according to market analysts.
Bitcoin has risen in value by around $600 since the US assassination of Islamic Revolutionary Guard Corps Maj Gen Qassem Soleimani on 3 January, taking its price above $7,500 and bucking a downward trend that began before Christmas.
The cryptocurrency is notoriously volatile, making it difficult to attribute one single factor to major market movements, however geopolitical uncertainty is often cited as a contributing factor to price increases.
“Bitcoin, the world’s largest cryptocurrency by market capitalisation, jumped 5 per cent as news of the strikes broke around the world on Friday,” said Nigel Green, chief executive of financial consultancy firm deVere Group.
“Simultaneously, the price of gold – known as the ultimate safe-haven asset – also moved higher. The latest bitcoin price increase underscores a mounting consensus that bitcoin is becoming a flight-to-safety asset.”
A similar trend happened in August, when global stocks were rocked and China's yuan was devalued due to the ongoing trade war between the US and China.
When traditional markets are unsettled, investors typically look to non-sovereign assets and currencies like gold and bitcoin in order to safeguard their wealth.
The latest price increase shows no signs of slowing down, with near hour-on-hour rises over the last three days for bitcoin. Since the targeted killing of Soleimani, tensions between the US and Iran have also continued to grow, with Donald Trump threatening to launch attacks on cultural sites if Iran retaliates.
Other alternative cryptocurrencies, or altcoins, have also experienced significant price movements, including ripple (XRP) and bitcoin cash. Around $20 billion in value was added across all cryptocurrencies.
"Even with the very real political risks, which has been pushing main market investors to safe haven assets, altcoins are maintaining price," said Macus Swanepoel, CEO of London-based cryptocurrency exchange Luno.
"Most investors will be keeping an eye on the US/ Iran situation."
