Is Israel-Hamas conflict impacting the cryptocurrency market? Here is what investors must know

As the Israel-Hamas conflict continues to escalate, it’s hard to ignore the repercussions it may have on different sectors, including the volatile cryptocurrency market. Several analysts and investors are speculating about the impacts of this conflict on virtual assets.

According to a Wall Street Journal report, Hamas’s strike on Israel last weekend was financed through cryptocurrency. The digital currency wallets that Israeli authorities linked to the Palestine Islamic Jihad (PIJ) received as much as $93 million in crypto between August 2021 and this June. Wallets connected to Hamas received about $41 million over a similar time period, per the report.

“Hamas terrorists launched campaigns on social media to raise funds through crypto, and Israel, known for its tech expertise, blocked the crypto accounts used for Hamas funding,” said Manhar Garegret, Country Head of India and Global Partnerships at Liminal, a wallet infrastructure and custody solutions platform. “The crypto accounts used for illicit activities were easily identified with the help of support from popular exchanges like Binance, and immediate action was taken by law enforcement agencies, resulting in one of the biggest financial assaults on Hamas terrorists,” said Garegret.

However, outside of crypto markets, it is important to note that the conflict showcased the ability of intelligence agencies to identify and restrict terrorist-owned digital asset wallets. Garegret said, “Using Blockchain analysis, Israel’s intelligence agencies showcased a new way of crippling the terrorist by cutting off their funding resources.”

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Impact on digital currencies and what you should do: The crypto market is driven by multiple factors, and the global geopolitical situation is one of them. “Since the start of the Israel-Hamas conflict, we have not witnessed any significant fluctuation in the prices of digital assets, but things may look different in the short to mid-term. Israel is an active player in crypto mining, and any disruption in the mining process may result in a sharp rise in the Bitcoin hash rate. Any increase in BTC hash rate could directly impact its price in the short term,” said Garegret.

Analysts believe that if the Israel-Hamas conflict contributes to a broader sense of global uncertainty, it could potentially drive some investors towards assets like Bitcoin, which is often referred to as “digital gold” and is considered by some as a store of value in times of uncertainty.

Kumar Gaurav, CEO of Cashaa, a blockchain-based financial products platform, says, “It’s important to note that cryptocurrencies have demonstrated resilience amidst geopolitical turmoil in the past. Their decentralised nature and appeal as a hedge against traditional financial systems make them an attractive asset class during uncertain times.”

For instance, Bitcoin’s price spiked during the US-Iran tensions in early 2020.

Gaurav adds, “The Israel-Hamas conflict, a recurring and deep-rooted crisis in the Middle East, has the potential to cast a temporary shadow over the crypto market, much like we observed during the Russia-Ukraine war. Thus, the outlook in the near-term suggests that, while short-term fluctuations may occur, the overall trajectory for cryptocurrencies remains positive as they continue to evolve and mature. Investors should exercise caution and maintain confidence in digital assets’ long-term potential. In such uncertain times, the best thing to do is to accumulate and hold on to your crypto investments for the long term.”

What you should understand: While the Israel-Hamas conflict undoubtedly has global economic impacts, its effect on cryptocurrencies is not immediately visible. Instead, market volatility seems more influenced by factors such as key influencers’ comments, policy modifications, and overall market sentiment. However, as the situation evolves, there might be subtle and indirect impacts on the broader crypto market. Further observation and analysis would be essential for a precise understanding. Thus, the potential of cryptocurrencies to act as safe havens in times of geopolitical uncertainties remains an intriguing realm for future investigation.