Why Bitcoin Rallies on Geopolitical Uncertainty

Chaos is a ladder.

Bitcoin has performed well since the start of the Iran conflict. Since U.S. and Israeli airstrikes began on February 28, bitcoin is up 12% while the S&P 500 is down 1% and gold has fallen 10%.

Bitcoin, Gold, and Stocks: Performance During 2026 Iran Conflict

Source: Bitwise Asset Management with data from Bloomberg. Data from market close on February 27, 2026 to April 10, 2026.

This rally has caught many off guard. After all, bitcoin is a risk asset, and many assumed it would fall during a risk-off geopolitical shock. Pundits have grasped for explanations: Some argue that geopolitics is irrelevant for bitcoin, while others point out that war often leads to money printing, which tends to boost bitcoin in the long term.

Both arguments are wrong.

Bitcoin’s strength during this crisis stems directly from the conflict itself. In this memo, we’ll break down why—and explain how it can provide a clearer view of bitcoin’s potential performance going forward.

Two Bets in One

Buying bitcoin is like making two bets at once.

First, you’re betting that bitcoin will become “digital gold” and compete with physical gold in the $38 trillion “store of value” market. That’s bitcoin’s current use case, and I’d consider it a very attractive bet. As I explained in an earlier memo, bitcoin can reach $1 million by capturing just 17% of this market.

But there’s a second bet you make when you buy bitcoin—that someday, maybe, bitcoin might act like a traditional currency.

I think of this second bet like an out-of-the-money call option. It pays off if bitcoin is used more widely for international settlement.

The problem is, for most of bitcoin’s life, this has seemed deeply unlikely. Until a few years ago, the world ran almost exclusively on dollar-based financial rails, and the idea of using a volatile, emerging technology like bitcoin for international commerce seemed far-fetched.

Until…

Dollar Dominance Declines

Things started to change after Russia’s invasion of Ukraine in 2022, when the U.S. and its allies ejected major Russian banks from the international, dollar-based Swift payments network. France's finance minister at the time called it a "financial nuclear weapon.” Removing a country from Swift effectively walled it off from the global economy.

Except it didn’t, because other countries didn’t just sit pat. China, in particular, stepped into fill the void, and Chinese-based settlement rails began gaining traction. Before the Russia-Ukraine war began, yuan settlements accounted for less than 2% of Russia's total trade; by early 2024, that figure had risen to nearly 40%. Today, Russia and China conduct over 99% of their bilateral trade in rubles and yuan, according to Russia's finance minister. No dollars required.

When the Russia/Swift split happened, I mused that the fracturing of dollar hegemony might open up space for bitcoin. If countries grew reluctant to deal in dollars for political reasons, it stood to reason that they might prefer an apolitical alternative.

Which brings us to today.

Pay Me in Bitcoin

Last week, a spokesperson for Iran’s oil agency told the Financial Times that it would begin collecting a $1/barrel toll (the equivalent of $20 million/day) from any ships passing through the Strait of Hormuz. Importantly, they said it would be collected in bitcoin.

The announcement raised new concerns on sanctions avoidance and money laundering. After all, critics argued, bitcoin payments settle nearly instantly and therefore cannot be easily blocked or seized. The move could reflect Iran’s belief that it can launder bitcoin more easily than traditional currencies.

While the sanctions concerns bear careful monitoring, the reality is nuanced, and some of the worries don't hold water. For one, nothing about bitcoin eliminates sanctions: Firms making bitcoin payments to Iran must be permitted to do so by the U.S. Treasury Department or they face severe penalties. Additionally, “the blockchain’s inherent transparency makes it possible for regulators and compliance teams to trace the flow of funds in near-real time,” according to a recent piece from Chainalysis. There are easier ways to launder money than using a permanent ledger instantly viewable to anyone on the globe.

It’s not clear whether Iran will stick with bitcoin or route funding through China. What is clear is that, in an increasingly fractured world, with dollar hegemony fading, countries are slowly finding ways to weave bitcoin—an apolitical currency—into global commerce.

Options Theory

This is why I compare bitcoin to an out-of-the-money call option.

Options gain value when one of two things happens: Either the probability of hitting the price target improves, or the volatility of the underlying market increases.

The probability aspect is obvious: If a stock is trading at $100 and I have an option to buy it at $120, that option gets more valuable if the stock starts trading at $110.

The volatility aspect is less obvious but equally true. If a stock is trading at $100 but suddenly becomes twice as volatile, its probability of hitting $120 increases simply because it’s bouncing around more.

What happened in Iran caused both to occur simultaneously. When the war broke out in the Middle East,  the world’s monetary order became more volatile. I’d argue that this alone increased the probability of bitcoin becoming a global currency—and therefore made it a more valuable out-of-the-money call option.

And then, with Iran’s announcement last week, the world took a step closer to integrating an apolitical currency into the global financial ecosystem. While the circumstances behind it are unsettling—the hostilities have already exacted a great toll on an economic, political, and human level—it points to an important reality: When nations feud, the incentive to deal with apolitical money like bitcoin goes up.

Why This Matters

The reason this matters is that it tells you two things about bitcoin’s future.

First, we should increasingly expect it to act as a hedge against geopolitical chaos: Challenging international developments that shake up global alliances increase the volatility of the world’s financial order, which raises the value of bitcoin as a call option.

Second, it means our price targets are too low. International transactions are a very large market. If bitcoin takes on a dual role as a store of value (like gold) and a currency (like the dollar), then $1 million per bitcoin begins to look like a starting point.

Risks and Important Information

No Advice on Investment; Risk of Loss: Prior to making any investment decision, each investor must undertake its own independent examination and investigation, including the merits and risks involved in an investment, and must base its investment decision—including a determination whether the investment would be a suitable investment for the investor—on such examination and investigation.

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