Bitcoin plunged back below $110K, closing down nearly 10% and at its lowest level since May at $100,970. The cryptocurrency fell below $99,000 for the first time, if only briefly, as rising geopolitical tensions—in particular, U.S. strikes in Iran—sent shockwaves through economies and markets. Even with the recent downturn, many analysts are still bullish on crypto, citing past history and a number of 2023 catalysts that could lead to increased prices again.

Market Reaction to Geopolitical Unrest

The decline in bitcoin price is being blamed on the risk-off sentiment that has taken over the market after the recent escalation of geopolitical tensions. In addition, investors typically rush to the haven during any major bout of uncertainty, causing dramatic sell-offs in riskier assets such as cryptocurrencies. The U.S. airstrikes that killed Iranian Major General Qasem Soleimani in Iraq have added fuel to the fire, further applying downward pressure on Bitcoin’s price.

Bitcoin’s price has shown a remarkable proclivity to rebound after steep declines when investor sentiment is at its most cynical. This contrarian behavior is a positive sign, indicating that the dip may be a buying opportunity for smart investors. Santiment’s analysis suggests that Bitcoin frequently moves opposite to the current trend of retail investors.

Retail shows extreme FUD after learning of US airstrikes on Iran. - Brianq from Santiment

Brianq from Santiment considered the inflated activity a buy signal. He thinks this time Bitcoin is going to surprise and go up despite bad news.

Correlation with Global M2 Money Supply

Several analysts have pointed to the strong correlation between Bitcoin's price and the growth of the global M2 money supply. Raoul Pal tweeted a chart showing this correlation, which shows that Bitcoin tends to lead M2 growth by 12 weeks. This fact indicates that Bitcoin’s price movements are subject to overarching macroeconomic conditions, namely the inflationary trend of the money supply.

Nothing seems unusual here but please do not expect all wiggles to match or all timing points to be exact, it’s the overall contextualization that matters the most… and yes, alts bleed more than BTC in corrections. - Raoul Pal

Arthur Hayes has emphasized the importance of monetary policy, arguing that loose monetary policy could drive Bitcoin's price to skyrocket, potentially even reaching $1 million.

Expert Predictions and Future Outlook

Even after the recent price decline, many experts are still bullish on Bitcoin’s long-term prospects. Arthur Hayes Structural value of Bitcoin at $95,000 On the one hand, TechDev makes the case that $170k isn’t as out of reach as you think.

Do you hear that? … it’s the sound of the money printers revving up to do their patriotic duty. This weakness shall pass and BTC will leave no doubt as to its safe haven status. - Arthur Hayes

TechDev has made the case that it shouldn’t be shocking to anyone that Bitcoin dropped under $100,000. They’re viewing it as a bit of a bullish long-term correction.

$95,000 would make sense structurally. Then $170,000 is closer than you think. - TechDev