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Bitcoin as a hedge against geopolitical risks?
• Bitcoin has shown above-average returns following major geopolitical risk events in the past.
• Our findings support previous analyses that support the thesis that cryptoassets may act as a hedge against geopolitical risks.
• This is generally consistent with the fact that Bitcoin can act as a safe-haven asset on account of its counterparty risk-free and censorship-resistant nature as well as its scarce supply characteristics.
“Buy when there is blood in the streets”
The quote ”buy when there is blood in the streets” is commonly attributed to Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family.
The full phrase is often rendered as ”The time to buy is when there’s blood in the streets, even if the blood is your own”, and it emphasises the idea of investing during times of market panic or extreme distress, when asset prices are low and fear is high.
This contrarian investment philosophy suggests that significant gains can be made by buying assets when others are too scared to buy.
The major question for investors is how these developments might affect the performance of Bitcoin and other cryptoassets going forward?
What’s the impact of geopolitical risk events on Bitcoin?
Most geopolitical risk events tend to be rather short-term in nature. Nonetheless, they tend to have a significant (negative) impact on most traditional financial asset prices due to an increase in uncertainty.
Although geopolitical risks seem to be hard to define at first there, is a wide array of research that has tried to quantify episodes of heightened geopolitical risks. One of these approaches was put forth by Caldara and Iacoviello (2022) who compiled a
Geopolitical Risk Index based on relevant mentions in major newspapers. The rationale is that geopolitical risks are high when there is a high frequency of mentions in newspapers on geopolitical topics such as war threats or terror acts.
In fact, the Geopolitical Risk Index tends to spike during major geopolitical events such the Russian invasion of Ukraine in early 2022.
The following analysis looks at the performance track record of Bitcoin around these major geopolitical risk events.
Bitcoin – a hedge against geopolitical risks?
We have started our analysis by only looking at statistically significant geopolitical risk events, i.e. only those that exceeded the threshold of 2 standard deviations across the full sample of observations (July 2010 – today). In a second step, we have selected the top 20 geopolitical risk events based on the overall level of the Geopolitical Risk Index (GPR Index) itself.
The following table shows these top 20 geopolitical risk events and the subsequent performance index of Bitcoin up to 50 days after the event:
On average, Bitcoin has appreciated significantly following these major geopolitical risk events in the past.
Even stripping out the average performance across a random window of 100 days, reveals that the “excess performance” of Bitcoin was still positive around these major geopolitical events.
In other words, Bitcoin has even shown above-average returns following these major geopolitical risk events in the past.
This implies that Bitcoin appears to thrive in an environment of heightened geopolitical risk. This finding is also echoed in previous research by Almeida et al. (2024) who have found that cryptoassets can act as a hedge against geopolitical risks.
We think this is generally consistent with the fact that Bitcoin can act as a safe-haven asset on account of its counterparty risk-free and censorship-resistant nature as well as its scarce supply characteristics.
In fact, due to the latest Halving in the supply growth of Bitcoin, Bitcoin’s supply has become double as scarce as gold for the first time in history.
This investment hypothesis is also supported by the fact that periods of heightened geopolitical risks have been associated with high inflation regimes in the past.
One of the major reasons is the fact that major geopolitical tensions tend to be associated with supply-chain disruptions, commodity price spikes as well as looser monetary and fiscal policy.
Scarce assets like Bitcoin could particularly profit from such an environment.
Bottom Line
• Bitcoin has shown above-average returns following major geopolitical risk events in the past.
• Our findings support previous analyses that support the thesis that cryptoassets may act as a hedge against geopolitical risks.
• This is generally consistent with the fact that Bitcoin can act as a safe-haven asset on account of its counterparty risk-free and censorship-resistant nature as well as its scarce supply characteristics.
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- Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
- Bitcoin price technical analysis: Where are the liquidation levels?
- What are real-world assets and why do we need tokenization?
Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
Strategy (formerly MicroStrategy) has amassed a staggering $43 billion in Bitcoin, positioning itself at the forefront of the corporate “reserve race.” Under the leadership of Bitcoin maximalist Michael Saylor, the company now boasts an $84 billion market cap. But with such an aggressive strategy, how sustainable is its approach—and what risks lie ahead? We break it down in today’s analysis.
Bitcoin price technical analysis: Where are the liquidation levels?
A drop below $72,000 could flush longs, while a breakout above $90,000 may squeeze shorts. One key positive indicator is that Bitcoin continues to print higher lows since March 10, which preserves a bullish market structure in our view. Dive into our technical analysis.
What are real-world assets and why do we need tokenization?
Imagine owning a slice of a skyscraper or a piece of fine art with just a few clicks. Tokenization, the act of converting ownership rights to real-world assets (RWAs) into tradable tokens, has surpassed $10 billion in on-chain value, unlocking global 24/7 access to once-exclusive markets with liquidity, efficiency, and yield. Find out how it works.
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
Since President Trump appointed Mark Uyeda as acting SEC chair two months ago, many investigations into crypto businesses have been dropped, as the SEC moves away from regulation by enforcement and works to create a framework for digital assets. As regulations become clearer and news flow turns more positive, crypto prices—which dropped sharply this week—should begin to better reflect the new regulatory landscape in the US.
We believe this regulatory shift could ultimately help trigger the next leg of the current bull run, as investors better understand the significance of regulatory clarity and seek to acquire bitcoin and altcoins at what we believe are currently very favorable levels.
Market Highlights
SEC Dismisses Crypto Enforcement Actions
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This indicates a shift in SEC’s regulatory approach, favoring clearer guidelines over enforcement actions. Such a pivot could foster a more predictable environment, encouraging innovation within the sector.
Banks to Engage in Crypto Activities
The FDIC has rescinded previous guidelines which prevented financial institutions from engaging with crypto activities without prior sign-off.
By removing bureaucratic hurdles, banks may more readily offer crypto-related services, potentially leading to broader adoption and integration of digital assets.
Bitcoin ETFs Inflow Streak Surpassed $1 Billion
US spot Bitcoin ETFs have recorded a 10-day inflow streak exceeding $1 billion marking the longest such streak in 2025.
This underscores growing institutional and retail investor confidence in Bitcoin as an asset class that helps increase market stability and possibly paving the way for the approval of other crypto-based financial products.
Market Metrics
All NCITM constituents had negative performance last week, with XRP (-10.8%) and UNI (-10.7%) seeing the steepest declines. ETH also experienced a sharp drop (-9.1%), contributing to NCITM’s underperformance relative to BTC (-2.9%). The NCITM -4.2% decline reflects a broader risk-off sentiment in the crypto market, as investors reassess their positions amid ongoing macroeconomic uncertainties.
NCITM (-4.2%) extended its underperformance last week, deepening year-to-date losses. Traditional indices like the S&P 500 (-1.5%) and Nasdaq 100 (-2.4%) saw smaller declines. The gap between crypto and other risk assets continues to widen, while gold has emerged as the top performer in 2025, gaining nearly 20% amid ongoing macroeconomic uncertainties. This trend highlights a growing risk-off sentiment, with investors shifting toward defensive assets and away from high-volatility investments.
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