Since February 28, the United States and Israel have launched coordinated attacks on Iran. Within a few days, water traffic in the Strait of Hormuz has fully halted. Ships carrying the world’s oil supply cannot pass through the Strait, causing oil prices to hike from $60 per barrel to $100.
This oil crisis shook the economy, including cryptocurrency. Investors begin to question how oil prices and geopolitical tensions impact cryptocurrency, especially Bitcoin. New research from Hashrate Index explains the correlation between the two.
The good news is that oil is very rarely used in the Bitcoin mining process. Most countries use gas, coal, or water instead of crude oil to produce electricity.
How about countries in the Persian Gulf and Gulf of Oman, like the United Arab Emirates and Oman? Research shows that these countries contribute 6% to Bitcoin’s total hashrate. Hashrate is the measure of a blockchain network’s computational power.
So, oil prices don’t have a big impact on Bitcoin mining. However, the rise of crude oil prices still affects the revenue of Bitcoin investors. Geopolitical tensions from war, Strait of Hormuz disruptions, and lack of resources impact the global capital market.
With the rise of oil prices, central banks are incentivized to increase interest rates. Market expectations shift, and capital rotates away from highly volatile assets. This is proven when Bitcoin dropped 6.4% in 24 hours at the start of the US-Iran war..
In conclusion, oil price hikes have very small impact on Bitcoin supply. However, the increase still reflects the unstable geopolitical conditions that may still affect Bitcoin’s price.
