Bitcoin: The 'Digital Gold' Amid the Hormuz Crisis

Bitcoin: The 'Digital Gold' Amid the Hormuz Crisis – Is BTC Decoupling?

Bitcoin is currently facing significant challenges as it struggles to prove its status as a safe haven during the ongoing crisis in the Strait of Hormuz, which is driving oil prices toward $113. Instead of decoupling from these influences, BTC is exhibiting a concerning positive correlation of 0.68 with crude oil prices, suggesting that it is behaving more like a risk asset rather than ‘digital gold.’

Key Takeaways

Correlation Shift: The correlation coefficient between Bitcoin and WTI crude oil has surged to 0.68, moving away from historical norms that are usually below 0.3.
Impact of Oil Prices: Goldman Sachs anticipates that Brent crude will average around $110 through April if oil flows from Hormuz stabilize at 5% capacity.
Support Levels for BTC: It is crucial for Bitcoin bulls to protect the $65,000 support zone to avoid a potential drop to $58,000.

Understanding the Correlation: How $100 Oil Affects Bitcoin

The Strait of Hormuz is currently responsible for a disruption that affects 20% of the global oil supply, leading to increased volatility in the cryptocurrency market instead of reinforcing its value. On Monday, analysts from Goldman Sachs significantly raised their oil price forecasts, now predicting Brent crude prices to average $110 in March and April. Futures prices have already responded, with Brent reaching $113.32 and WTI climbing to $101.01 in reaction to President Trump's ultimatum to Tehran.

Image illustrating oil price fluctuations

Typically, geopolitical unrest boosts interest in Bitcoin as a store of value or digital gold. However, the recent data reveals a fundamental shift. Bitcoin’s correlation with oil prices has risen to 0.68. This shift occurs because inflation expectations are now affecting Bitcoin’s performance as oil prices push inflation higher, which in turn compels the Federal Reserve to maintain elevated interest rates. Sustained high rates can drain the liquidity that Bitcoin needs to thrive.

Bitcoin tends to lag behind money supply growth and faces difficulties when energy prices rise. The impact of surging energy costs can be severe: they act as a dual tax on consumers and miners. Should oil flows through Hormuz stagnate at 5% until April 10—Goldman’s base scenario—we could enter a stagflation environment that would adversely affect all risk assets, including cryptocurrencies.

The trading patterns provide important insights. Instead of rallying in response to fear of conflict, Bitcoin appears to be suffering from “liquidity fear.” Without a decrease in correlation with oil, or stabilization in oil prices, Bitcoin's potential upside beyond $70,000 will be limited by overarching economic challenges.

Navigating Macro Risks: Can Whales withstand the Pressure?

Despite widespread panic in the paper market, on-chain data indicates a contrasting sentiment among Bitcoin whales. Although retail interest has weakened, institutional wallets holding between 1,000 and 10,000 BTC have been consistently accumulating within the price range of $65,000 to $70,000.

This suggests that savvy investors perceive current macro risks as temporary or anticipate policy adjustments, such as significant liquidity injections, to address the recent oil crisis.

Additionally, Morgan Stanley's recent ETF filing reinforces the notion that institutional interest is robust, continuing to build the necessary framework regardless of short-term crude prices. However, the market is governed by price levels, not narratives. The current correlation of 0.68 indicates Bitcoin’s vulnerability to any further Middle Eastern tensions.

For those following the bearish scenario, there is a clear level of invalidation. If Bitcoin recovers to $72,000 while oil prices maintain above $100, the idea of decoupling could once again be on the table. Until such conditions are met, Bitcoin remains closely tied to the fluctuations of energy markets.