Generally, when national conflicts break out, the economy is often the first casualty and there’s a potential for a temporary spillover on the crypto market.

Much like other geopolitical uproars, the Isreal-Hamas conflict has the potential of inciting repercussions on the economy, including the volatile crypto market. While people all over the world call for a quick resolution, experts are looking at the likely effects of the conflict on the cryptocurrency market.

Considering the overall economy, conflicts like this usually cause retardation in production and the overall economic standpoint of the involved nations. While some sectors of the economy, for instance, military and engineering, may experience significant gains in this period, others like aviation and tourism will see a sharp decline. In the context of cryptocurrency, there is still a short-term negligible effect as perceived in the prices of crypto assets like Bitcoin and Ethereum. One can easily deduce that fluctuations in cryptocurrency are less than many thought they would.

How is the crypto market currently reacting?

The broader crypto market is showing early resilience at this moment and many holders are remaining confident in their assets. The conflict has not provoked any significant reaction from Bitcoin although the overall market slumped 2% on Monday.

While the effects of conflicts on the financial sector are complex, experts said that it is too early to conclude the exact implications on the crypto industry. It is noteworthy that the price of Bitcoin remains stable at around $27,000.

Israel went after Hamas Crypto Accounts

It was reported that the Israeli police have frozen the cryptocurrency accounts linked to Hamas. Claiming that Hamas sought funding using crypto wallets, Israeli authorities are seeking to cut funding of Hamas using blockchain technologies.

Source: Twitter

What are the possible long-term implications?

The crypto market is driven by several factors and geopolitical conflicts are one of them. The major effect that can be perceived is the escalation of the inherent volatility of crypto assets. During these times, crypto prices can experience significant rises or declines, leading the opportunities or losses for those holding them. Other factors that can influence crypto market volatility in these times include policy modifications, key influencer comments, and market sentiments.

In addition, as the conflict escalates, a “flight to safety” situation may erupt. This is the ability of crypto holders to move their assets to less risky ones. This will affect the dynamism of the overall market and can cause sharp effects. In addition to this, crypto holders can develop market panic, leading to massive sell-offs of their assets which may cause declines in the broader crypto market.

Israel is a major player in the mining of cryptocurrencies and a disruption in their mining process, which may be triggered by the ongoing crisis, will result in a sharp surge in the Bitcoin hash rate. Currently, any increase in Bitcoin hash rate will affect its price short term.

Because of its decentralized nature though, many perceive cryptocurrency as a valuable store of value in times of uncertainty and they have demonstrated resilience during past geopolitical conflicts. A notable example is the spike in the price of Bitcoin during the US-Iran tensions that happened in the early months of 2020. It is likely that more people will hold on to Bitcoin and other notable crypto assets during these times as they are perceived as “digital gold” to mitigate the effects of the conflict on their individual lives.

In conclusion, while the Isreal-Hamas conflict has global economic effects, its impact on the crypto market is not immediately perceivable yet. As the situation progresses though, indirect and subtle impacts may be felt on the broader crypto market. Experts all over the world are observing the situation and deeper analyses will be needed to ascertain the exact implications. In the meantime, the status of cryptocurrency as a safe haven in times of geopolitical conflicts remains untouched and the best thing to do at such times is to accumulate and hold on to crypto investments for the long term.