Investors are currently sifting through a decade of market data to see if a massive spike in energy costs will sink Bitcoin and the crypto market.
The 2014 crash happened alongside the Mt. Gox exchange failure. In 2022, the Terra-Luna collapse wiped out billions. These events, rather than just expensive fuel, played the biggest role in deepening previous bear markets.
The Weight Of Geopolitics On Digital AssetsWhen energy becomes this expensive, it often acts as a drag on the entire economy. It takes money out of the pockets of everyday people who might otherwise buy digital assets.
Data shows that Bitcoin miners also feel the sting because their operations require significant amounts of power.
In the past 12 years, there have only been three times when oil hit this specific $104 level. Because these events are so rare, some analysts believe it is hard to say for sure that one causes the other.
The first instance occurred in June 2014 when ISIS moved into northern Iraq. Bitcoin was trading around $600 at the time but lost 21% of its value over the next 10 weeks.
It stayed down for a long time. It actually took more than two years for the price to climb back to where it started before that specific oil spike.
Searching For Patterns In A Volatile Market The most recent example happened in May 2022. This followed a proposal by the European Commission to phase out Russian oil imports. Bitcoin did not just dip; it fell 25% in only seven days.
That specific crash started a bear market that lasted for 19 months. Even though oil prices eventually dropped back below $100 for several years, the damage to the crypto world was already done.
A Fear Of Broad Economic PullbacksEven though oil stayed high, Bitcoin managed to recover its footing quickly. This shows that the relationship between the two is not always a straight line. Sometimes the market reacts to the news of war more than the actual cost of the commodity.
Featured image from Trade Brains, chart from TradingView
