Bitwise Index Services, a subsidiary of cryptocurrency index provider Bitwise Asset Management, reported a 33% surge in the Bitwise 10 Large Cap Crypto Index after the U.S. military strike in Iran, the firm said.
The San Francisco-based company reasons the rally in the crypto markets directly links to the Jan. 2 U.S. drone strike that reportedly led to the death of the Iranian Major General Qassem Soleimani of the Islamic Revolutionary Guard Corps. In response to the flash in geopolitical tensions, equity markets fell while safe-haven investments like gold and oil—as well as crypto coins—rose.
Bitwise 10 tracks the performance of the 10 most widely held coins, including Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin, and others. Bitcoin started the year bouncing around at just over $7,000, but jumped significantly by the end of the month, according to Matt Hougan, Bitwise’s managing director and global head of research. He wrote that Bitcoin Cash had a similar response, jumping “an eye-popping 84.5%.”
While that may lend credence to Bitcoin believers' argument that the decentralized currency is a hedge against financial turmoil, Hougan urged perspective. “Crypto advocates have argued for years that bitcoin should act as a ‘safe haven asset,’ suggesting it shares the same fundamental characteristics as gold. Its track record in the market, however, is mixed: There have been times when it has behaved as a safe-haven asset (during the 2019 China trade tensions), and times when it has not (during the October 2019 market pullback)," he says.
Outside of Bitcoin, smaller crypto assets joined in the January rally, his firm noted. Cardano returned 63.3%; Lumens brought in 35.6%; EOS had 59.8%; Tezos had 20.8%; Chainlink did 59.4% and Litecoin returned 64.7%. On the flip side, Hougan found that these figures were still 10% or more—some significantly more—lower than their all-time highs.
“Bitcoin’s big move stirred bullish sentiments in crypto, which spilled over into smaller cap assets,” said Hougan in the post. "Whether the recent alt-coin rally will continue depends on many things, including the development of more real-world use cases for these assets (akin to bitcoin finding its use as a geopolitical hedge asset for investors).”