Crypto Fundamental Analysis: Is the Temporary Safe Haven Returning?

As the second week of March comes to an end, one of the most relevant events continuing to influence market movements in general is the ongoing geopolitical conflict in the Middle East. However, what has become interesting in the short term is that as the conflict continues to develop, a mild improvement in confidence has begun to emerge within cryptocurrency markets.

As capital flows look for alternative or safer markets, the cryptocurrency sector appears to be regaining attention as a potential temporary safe-haven asset in the short term. This dynamic has helped sustain renewed buying pressure that could remain relevant for the crypto market in the coming trading sessions.

Geopolitical Tensions Remain Relevant

The trading week has continued to be marked by the ongoing conflict in the Middle East. As attacks persist across the region, disruptions to the operation of the Strait of Hormuz have become increasingly evident. This has affected short-term expectations regarding global oil market dynamics.

In fact, according to recent statements from the International Energy Agency, this could represent one of the most significant disruptions to oil supply in recent decades, and it may take several months before activity in the strait returns to pre-conflict conditions.

The escalation of the conflict has pushed market dynamics away from traditional risk assets and toward assets perceived as safer, such as the US dollar. However, it also appears that markets have begun to show a preference for alternative assets such as cryptocurrencies, where the current dynamic seems to focus on moving away from traditional risk markets.

Indeed, this phenomenon has begun to be reflected in increased market activity when using Bitcoin as a reference and analyzing the behavior of active addresses on its network in recent sessions. This indicator has shown consistent growth, reaching nearly 639,000 active addresses as of March 12. This suggests that within the retail segment of the market there has been a notable increase in activity which, combined with rising prices, may indicate stronger appetite for Bitcoin in recent sessions.

Source: Cryptoquant

Similarly, when observing the behavior of confirmed transactions per day, a consistent increase can also be seen in recent trading sessions. The indicator reached approximately 450,000 transactions on March 11, after previously recording lows near 380,000 transactions earlier in the week

This demonstrates consistent growth in activity within the BTC network and, as Bitcoin prices have recovered in the short term, it is possible that these transactions reflect increased buying activity in the market, once again highlighting rising appetite for the asset.

Source: Blockchain

In summary, appetite for the cryptocurrency market appears to be shifting in the short term. Despite the persistent risk sentiment in global markets caused by the Middle East conflict, activity in cryptocurrencies such as Bitcoin has increased, suggesting that the market is once again being perceived as an alternative asset and potential temporary safe haven in the short term.

If on-chain activity indicators for BTC continue to show meaningful growth, this could help sustain more consistent buying pressure in the cryptocurrency market in the coming sessions.

Bitcoin Compared with Other Markets

Bitcoin has recently begun to show a slight loss of positive correlation with traditional risk assets such as the equity market. The correlation coefficient between Bitcoin and the SPX index over the past 50 sessions has dropped slightly below 0.5, indicating that although a positive correlation remains, it is becoming less significant compared with previous weeks. It is important to remember that correlation coefficients can change over time.

This suggests that while the correlation with traditional markets remains slightly positive, its relevance has begun to decline. While equity indices such as the SPX have shown a consistent weakness due to a lack of risk appetite, Bitcoin has attempted to maintain a moderate recovery in the short term. This dynamic has allowed the cryptocurrency market to partially distance itself from the behavior of traditional risk assets and reposition itself as a more alternative market within the current financial environment.

Source: Data – TVC, StoneX, Tradingview

Looking at the dynamics of relative volatility across major markets, cryptocurrencies in general have begun to show weekly closing movements that are lower than their average weekly, monthly, and even annual volatility levels.

Bitcoin, although also trading below its weekly volatility average, still shows movements that remain somewhat relevant compared with its monthly and annual averages. In contrast, other markets such as the US dollar, equity indices, oil, and even bonds continue to show significant short-term volatility.

This suggests that the relatively less aggressive price movements in the cryptocurrency market compared with other markets may be creating a perception of relative stability. This dynamic could be attracting capital into the crypto sector from participants seeking markets with lower relative volatility compared with the movements observed in traditional assets during the week.

Source: Data – TVC, StoneX, Tradingview

Taken together, the combination of a slight decline in correlation with traditional markets and the perception of relative stability associated with smaller price variations suggests that investor interest in cryptocurrencies may be starting to recover. This could allow more consistent buying pressure to develop in the short term, provided that no major risk event emerges that could trigger renewed panic across global financial markets.

Confidence Attempts to Recover, but It Is Not Enough

The Crypto Fear and Greed Index continues to fluctuate around 15 points, and although some recovery has been observed compared with previous sessions, the index remains within “extreme fear” territory, reflecting that a significant perception of risk still exists within the market.

Source: Coinmarketcap

In this context, weak confidence continues to make it difficult to consolidate sustained demand. As long as sentiment indicators fail to show meaningful improvement, the recent attempt at recovery in the cryptocurrency market may struggle to hold in the short term, and episodes of weakness similar to those seen in previous weeks could reappear.

Written by Julian Pineda, CFA, CMT – Market Analyst

Follow him on: @julianpineda25