Bitcoin Could See a Big Catch-Up Rally Once Geopolitical Tensions Ease

As much as 80% of Bitcoin’s price action next month could depend on whether the conflict in the Middle East shows signs of concluding.

Bitcoin climbed back above $72,000 on Friday as a two-week U.S.-Iran ceasefire lifted crypto markets, even though the truce remains contested.

However, on-chain data firm Santiment says the bounce is “a small drop in the bucket” but argues that the asset has clear upside once the geopolitical picture resolves.

Bitcoin Lagging Gold and Stocks, but the Gap Has Closed Before

According to Santiment, BTC is down roughly 20% year-to-date, compared to a 2% loss for the S&P 500 and a 9% gain for gold in the same period, leaving the cryptocurrency as the clear laggard.

However, analyst Brian Quinlivan sees that performance gap as a reason for patience rather than despair.

“Regression to the mean would indicate that Bitcoin has a higher upside compared to the other two sectors,” he said. “If the war starts to look like it’s concluding, watch for the S&P 500 and Bitcoin to really start to thrive.”

The two-week ceasefire announced on April 8 pushed BTC past $72,000, with additional reports of Iran requiring payment for passage through the Strait of Hormuz in crypto, taking it closer to $73,000. However, as doubts started emerging as to whether it would hold, with airstrikes going on and Israel’s position still unclear, the asset retreated toward $71,000.

Quinlivan put a rough number on just how much the situation in the Middle East has dominated the narrative, saying:

“I would estimate that 80% of Bitcoin next month is going to depend on whether this war shows signs of concluding soon.”

He added that such an outcome would allow key stakeholders to start accumulating with confidence again.

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In the past, when conditions changed, Bitcoin tended to catch up quickly, and Quinlivan referred to several historical precedents, including March and April of 2020 during the COVID pandemic, when he said many traders thought BTC would go to zero, but instead, it moved up.

He also pointed to BTC’s performance in the aftermath of the FTX collapse:

“Everyone thought Sam Bankman-Fried ruined crypto forever,” the market watcher said. “Bitcoin goes below $16K, and then within what two years it’s up above $100K.”

In both cases, the people who bought when collective sentiment was at its most negative were the ones who came closest to timing the bottom.

Whales Are Sitting As Retail Accumulates

Meanwhile, large Bitcoin holders have been unusually flat, with Santiment data showing activity from wallets with between 10 and 10,000 BTC at a four-year low. And while Quinlivan doesn’t think it’s necessarily a bad thing for them to be sitting on their BTC, he suggested the market would be better off if there were more utility from them.

On the other hand, wallets with less than 0.01 BTC have been accumulating on dips. According to Santiment, the 365-day MVRV is at around -24%, and historically, such readings deep below zero have marked low-risk buying windows, which the small holders seem to be taking advantage of. Still, their collective share of the supply is at a paltry 0.25%.