Bitcoin’s Two Use Cases Are Fueling Its Surge During Geopolitical Turmoil

Bitwise CIO Matt Hougan says Bitcoin’s rally is driven by instability, and not speculation.

Bitcoin’s latest rally is defying a long-standing market assumption – that the cryptocurrency behaves like a risk asset during geopolitical crises.

The world’s largest digital asset climbed to nearly $75,000, its highest level in almost a month, even as tensions in the Middle East escalated. While traditional markets wavered, Bitcoin moved in the opposite direction.

According to Matt Hougan, the move is not coincidental. Instead, he argues that Bitcoin is benefiting directly from geopolitical instability, challenging the notion that it should fall during periods of increased uncertainty.

Dollar Dominance Cracks

Since US and Israeli airstrikes began on February 28, Bitcoin has risen 13%, while traditional assets have moved in the opposite direction, with the S&P 500 declining 1% and gold falling 10%. This divergence has challenged the conventional assumption that BTC behaves purely as a risk asset and should therefore decline during periods of geopolitical stress.

Hougan’s explanation centers on the idea that BTC represents two distinct but related use cases – it is already positioned as a store of value similar to gold, while also carrying the potential to evolve into a currency used for international transactions.

The second aspect is less established, but becomes more relevant during periods of instability, when traditional financial systems face pressure.

Geopolitical conflict strengthens both roles simultaneously. On one hand, uncertainty increases demand for alternative stores of value. On the other hand, it exposes weaknesses in the current global financial system, particularly its reliance on the dollar-based financial rails. This has been developing for several years, and a major turning point was following Russia’s invasion of Ukraine.

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After the conflict began, Russian banks were removed from the SWIFT payments network, which effectively limited the country’s access to the global financial system. The move showed that financial infrastructure tied to the dollar can be restricted for political reasons. This prompted other nations to look for alternatives.

China increased its role in global settlement flows, and trade between Russia and China moved away from the dollar toward local currencies. Over time, this reduced reliance on dollar-based payment systems and demonstrated that alternatives can develop when needed.

These changes matter for Bitcoin because they highlight demand for a payment method that is not controlled by any single country. Hougan explained that in these situations, an apolitical alternative like Bitcoin becomes more relevant. This does not mean it replaces existing systems, but it increases the chances that it could be used alongside them, especially in cross-border transactions.

Out-Of-The-Money Call Option

The current Iran conflict provides a clear example of this trend. Hougan also spoke about a statement from Iran’s oil agency reportedly indicating plans to collect toll payments from ships passing through the Strait of Hormuz in BTC. This shows that, during periods of conflict, countries may actively consider using BTC for real economic activity.

While concerns have been raised about sanctions evasion, Hougan maintained that Bitcoin does not remove regulatory obligations. Transactions are visible on the blockchain, and any entity making payments must still follow US Treasury rules or face penalties. This transparency makes it difficult to use Bitcoin as a simple workaround for restrictions.

Countries are exploring different ways to settle transactions when geopolitical tensions rise. This increases the likelihood that Bitcoin could play a role in global payments over time. Hougan compared Bitcoin to an out-of-the-money call option.

According to him, BTC’s value increases when the probability of it being used as a currency rises or when volatility in the global financial system increases. Geopolitical conflict contributes to both. It creates uncertainty in how the current system operates and, at the same time, pushes countries to consider alternatives. The Middle East conflict has done both by increasing instability and introducing real-world examples of Bitcoin being considered for payments.