Investors are advised to exercise caution with Bitcoin, as analysts warn a sharp price rebound amid escalating geopolitical tensions may be driven more by short-term market dynamics than by a sustainable shift in fundamentals.
Over the past month, the world's most popular cryptocurrency has climbed from around US$65,000 to $75,000, demonstrating notable resilience compared with traditional asset classes during the Middle East war. The move has sparked debate over whether Bitcoin is evolving into a safe-haven asset or entering a new bullish cycle.
Thanalop Preedamanoch, head of investment and fund manager at Merkle Capital, said the current price movement is more likely a "bull trap" than the beginning of a sustained uptrend.
"The issue is the absence of a strong catalyst," he said. "Historically, major crypto bull cycles have been supported by clear drivers, such as regulatory progress, that attract new liquidity. At this stage, we do not see comparable factors in play."
Instead, the recent rally appears to be a technical rebound following a correction of more than 50% from previous highs. Market behaviour suggests that price movements have been closely tied to liquidation zones, levels where leveraged positions are forcibly closed rather than driven by fresh capital inflows, said Mr Thanalop.
Bitcoin's surge towards $76,000 coincided with a major short liquidation zone that built up over the past 1-3 months, he said. In such conditions, large market participants can exert significant influence, pushing prices to trigger both long and short liquidations in a relatively low-liquidity environment.
MACRO RISKS
Beyond short-term volatility, analysts warn that broader macroeconomic risks remain a key overhang for the crypto market.
One major concern is persistently high inflation. Even if geopolitical tensions ease in the near term, damage to oil and natural gas infrastructure could take months or years to repair fully, potentially keeping energy prices elevated.
These events may limit the ability of central banks, particularly the Federal Reserve, to cut interest rates as previously expected.
Recession risks are also beginning to resurface. The US Treasury yield spread between 2-year and 10-year bonds is signalling a "bearish flattening" trend, said Mr Thanalop.
Short-term yields, which are more sensitive to policy rates, have risen faster than long-term yields, reflecting market expectations of prolonged high interest rates alongside weakening economic growth.
This combination of sticky inflation and slowing growth presents a challenging backdrop for risk assets, including cryptocurrencies, which typically benefit from abundant liquidity and accommodative monetary policy, he said.
CAUTIOUS OUTLOOK
While Bitcoin's recent performance may suggest increasing resilience, Merkle remains cautious about the sustainability of the rally. Without a clear catalyst to drive new demand, the market could remain vulnerable to further corrections.
For now, the crypto market appears to be navigating a complex environment shaped by geopolitical uncertainty, tightening financial conditions and shifting investor sentiment, said Mr Thanalop.
Investors are advised to exercise caution, as digital assets remain highly volatile and sensitive to both macroeconomic developments and market structure dynamics, he noted.
