Bitcoin Slides as US-Iran Tensions Flare Again

Bitcoin retreated Thursday after oil jumped past $105 a barrel amid escalating Middle East tensions.

The largest and oldest digital asset was recently changing hands at $77,208, after dipping to a low of $76,748, a drop of more than 2% over the past day.

That decline followed an Iranian signal that there was no intention of yielding to American forces. Both nations escalated attacks earlier this week amid some of the heaviest fighting since the conflict began in February.

Yemen’s Iran-backed Houthi rebels struck Saudi Arabian assets this week, adding further upward pressure on crude prices.

Middle East warfare pushes crude higher and diminishes the prospect of interest-rate cuts because of inflation. Bitcoin has generally done well when rates are low and has suffered sell-offs as the Federal Reserve turns hawkish.

America is currently caught in an affordability crunch, and higher oil prices are a prominent issue ahead of the midterm elections. President Donald Trump has assured voters that prices will be brought under control.

Federal Reserve Chair Kevin Warsh, in his first address as leader of the central bank, said inflation in the world’s largest economy had not fallen enough.

Traders are now anticipating a rate hike at next week’s central bank meeting.

Still, August produced one of bitcoin’s strongest runs after the U.S. Treasury said it would at least double the scale of its liquidity-support buyback operations in response to borrowing costs that were climbing sharply.

The news weighed on the dollar, while non-yielding assets such as bitcoin and gold have gained.

Though it previously moved in step with risk-on assets such as tech stocks, bitcoin this year has been more synchronized with gold as the so-called debasement trade regains momentum.

Investors have been buying the biggest cryptocurrency, together with the precious metal, to hedge against a falling dollar.