Financial markets are underestimating the crisis in the Middle East. ECB President Christine Lagarde said this clearly in an interview with The Economist. But many analysts agree that the crisis is too underestimated and that the consequences will be felt for an appreciable period of time. This picture sees Bitcoin once again re-emerging as a safe haven to the detriment of gold and Treasuries, which are instead affected by the prospects of monetary policy. This is what emerges from an analysis by Marc Des Ligneris, Senior Portfolio Manager of CoinShares, a leading European company in the digital asset sector.
An underestimated crisis
“Global markets are showing signs of stabilisation, despite the worsening of geopolitical tensions in the Middle East. Investors continue to read recent developments, including the renewed pressure on Iran, as a temporary escalation destined to reverse in the coming weeks”, underlines the analyst, highlighting that “this reading risks underestimating the structural complexity of the context, as a possible prolonged interruption in the Strait of Hormuz area could have direct effects on inflation, financial conditions and global supply chains”.
Risks on rates and emerging fragilities
There are some structural vulnerabilities especially in the United States. A significant portion of public debt – recalls the analyst – has been refinanced on short maturities, making the system more exposed to a reversal of the rate cycle and, in the presence of persistent inflationary pressures or a weakening of demand for Treasuries, an increase in yields could quickly translate into higher costs.
The effect on the markets: safe haven assets preferred to risky assets
In this context, the resilience of risky assets appears partly misaligned with the underlying risks. At the same time, the greater slope of the yield curve is putting new pressure on private credit, where critical issues related to liquidity are forcefully emerging with an ever-increasing number of funds introducing restrictions in repayment policies.
Divergent dynamics emerge among traditional safe haven assets: gold has shown marked volatility, also reflecting an already saturated positioning after the recent rise, while Bitcoin, after a significant correction, shows greater resilience as its positioning appears more balanced today. In particular, Bitcoin could benefit from two key factors: greater independence from traditional finance and the possibility that the Federal Reserve returns to more accommodating policies, including a new phase of quantitative easing, historically favorable to digital assets. On a structural level, demand for Bitcoin continues to appear solid: net inflows into ETFs and Digital Asset Treasuries have once again exceeded the new supply, signaling an increasingly favorable supply-demand balance.
