Bitcoin Could See a Big Catch-Up 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 conclusion.

Bitcoin rallied above $72,000 on Friday as a two-week ceasefire between the United States and Iran lifted crypto markets, although the truce remains contested.

However, on-chain data firm Santiment says the rebound is “a small drop in the bucket” but says the asset will have clear upside potential once the geopolitical situation is resolved.

Bitcoin lags behind gold and stocks, but the gap has already closed

According to Santiment, BTC is down about 20% year to date, compared to a 2% loss for the S&P 500 and a 9% gain for gold over the same period, leaving the cryptocurrency clearly lagging behind.

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

“Regression to the mean would indicate that Bitcoin has higher upside potential than the other two sectors,” he said. “If the war appears to be coming to an end, watch for the S&P 500 and Bitcoin to really start to boom.”

The two-week ceasefire announced on April 8 pushed BTC past $72,000, with additional reports that Iran was demanding payment for passage through the Strait of Hormuz in crypto, pushing it closer to $73,000. However, as doubts began to emerge about its sustainability, with airstrikes underway and Israel’s position still uncertain, the asset retreated towards $71,000.

Quinlivan gave a rough idea of ​​the extent to which the situation in the Middle East dominated the narrative, saying:

“I estimate that 80% of Bitcoin next month will 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 pointed to several historical precedents, including in March and April 2020 during the COVID pandemic, when he said many traders thought BTC would go to zero, but instead it rose.

He also highlighted BTC’s performance following the FTX collapse:

“Everyone thought Sam Bankman-Fried had ruined crypto forever,” the market watcher said. “Bitcoin goes below $16,000, then in two years it exceeds $100,000.”

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

Whales sit as retail sales pile up

Meanwhile, large Bitcoin holders remained unusually stable, with Santiment data showing wallet activity 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 sit on their BTC, he suggested the market would do better if they had more utility.

On the other hand, wallets holding less than 0.01 BTC accumulated during declines. According to Santiment, the 365-day MVRV sits at around -24%, and historically, such sub-zero numbers have marked low-risk buying windows, which small holders appear to take advantage of. Yet their collective share of the supply is only 0.25%.