Bitcoin Outperforms Gold Amid War-Driven Inflation and Market Volatility

Author: Ada, Deep Tide TechFlow

On the early morning of February 28, the United States and Israel launched a joint military strike on Iran.

The textbooks say: When war comes, buy gold.

But this time, the textbooks seem to be wrong.

Gold briefly surged from $5,296 to $5,423 before plummeting to around $5,020, closing with two consecutive weeks of losses. Bitcoin, on the other hand, rebounded from a panic low of $63,000 to $75,000—an increase of over 20%, outperforming gold, the S&P, and the Nasdaq.

The same war, the same period—gold fell, Bitcoin rose.

What exactly happened?

On the day war broke out, gold’s performance was still relatively normal. On February 28, gold prices spiked 2%, surpassing $5,300. Panic-driven buying flooded in, and everything appeared to follow the historical script.

Then the script unraveled.

On March 3, gold prices plunged over 6%, dropping to $5,085. Over the next two weeks, prices oscillated between $5,050 and $5,200 with no clear direction. As of this writing, spot gold is approximately $5,020, nearly 10% below its historical peak of $5,416 at the end of January.

The war rages on, bombs continue to fly, yet gold keeps falling.

Here’s the chain of events: In this war, the Strait of Hormuz was blockaded. Roughly one-fifth of global seaborne oil passes through this waterway. Iran’s blockade led insurance companies to withdraw coverage for ships, halting tanker operations and driving oil prices above $100. The International Energy Agency urgently released 400 million barrels of strategic petroleum reserves, which is double the amount released during the 2022 Russia-Ukraine war. TD Securities commodity strategist Daniel Ghali commented, "A gap this large cannot be plugged."

The spike in oil prices triggered inflation expectations. The market began to reprice the Federal Reserve's rate-cut trajectory. Before the war, the market anticipated two rate cuts by 2026. However, according to Bloomberg, traders now see virtually no chance of a rate cut at this week's Federal Reserve meeting.

High interest rates are gold’s nemesis. Gold doesn’t yield interest, so the higher the rates, the greater the opportunity cost of holding gold. Naturally, funds flow into interest-bearing assets like U.S. Treasury bonds. Barbara Lambrecht, a commodities analyst at Commerzbank, noted, "Gold prices have consistently failed to benefit from this geopolitical crisis. With oil and natural gas prices surging again this week, inflation risks have risen, potentially forcing central banks to take countermeasures."

The traditional logic is that war triggers panic, and panic drives gold higher. But this time, the chain of events has changed—war led to a spike in oil prices, which in turn fueled inflation, locking in high interest rates, which then suppressed gold. Gold isn’t afraid of war itself; it fears the inflationary aftermath of war.

Another worrisome signal has emerged. The governor of Poland's central bank recently stated publicly that they were considering selling part of their gold reserves to lock in profits. Over the past three years, global central bank gold purchases have been the biggest driver of gold price increases. If even central banks start to loosen their holdings, the long-term support for gold prices could crack. Philip Newman, director at London precious metals consultancy Metals Focus, observed, "Some investors are disappointed by gold’s lackluster reaction to the war and have begun reducing their positions. This reduction, in turn, reinforces the price weakness."

On February 28, news broke of the U.S. and Israel’s joint strike on Iran. Bitcoin, the only liquid asset still trading that day, plunged 8.5% within minutes, dropping from $66,000 to $63,000.

Gold rose, the U.S. dollar rose, and Bitcoin fell. Everyone’s initial reaction was the same: Bitcoin is a risk asset, not a safe haven asset.

However, looking back two weeks later, the situation is far more complex than that initial assessment.

By March 5, Bitcoin had rebounded to $73,156. On March 13, it briefly broke through $74,000. As of this writing, Bitcoin is trading at $73,170, up roughly 20% from its pre-war low. During the same period, gold fell about 3.5%, and the S&P 500 dropped about 1%.

Bitcoin outperformed all traditional safe-haven assets—this is a fact. But why?

The most popular explanation in the market is this: War leads to fiscal expansion and economic recession, forcing the Federal Reserve to eventually cut rates and print money, creating liquidity conditions favorable to Bitcoin. This narrative sounds compelling, but there’s an obvious logical flaw—if war-induced inflation prevents the Federal Reserve from cutting rates, "money printing" won’t happen. Furthermore, even if the Federal Reserve does ease liquidity, gold would benefit as well. The simple "liquidity easing expectation" doesn’t fully explain the divergence between gold and Bitcoin.

A more honest answer involves a combination of factors.

First, a technical oversold rebound. Bitcoin had fallen about 50% from its all-time high of $126,000 last October to $63,000. In early February, a sudden liquidation wave wiped out $2.5 billion in leveraged positions over one weekend. CoinDesk’s analysis suggests that this liquidation "cleared out the weakest holders and reset market positions," leaving a leaner market. So, when war broke out, there was little speculative capital left to be panic-sold.

Second, the structural advantage of 24/7 trading. February 28 was a Saturday, and when the U.S. and Israel struck Iran, global stock, bond, and commodity markets were closed. Bitcoin was the only open liquidity window. It was initially sold off because panic-driven funds needed immediate liquidity, but it also became the sole venue for capital to flow back into before markets reopened on Monday.

Third, ETF capital inflows. U.S. spot Bitcoin ETFs saw net inflows exceeding $1.34 billion in March, marking three consecutive weeks of inflows—the longest streak since July of last year. BlackRock's IBIT alone attracted nearly $1 billion in new funds in March. Meanwhile, the world's largest gold ETF (SPDR Gold ETF) experienced outflows exceeding $4.8 billion during the same period. Capital is relocating, but it seems more like institutions are reallocating their portfolios. It's still too early to conclude whether this constitutes a long-term trend.

Fourth, portability during wartime. This factor is rarely mentioned in mainstream analysis but becomes extremely significant in specific scenarios, such as the Middle Eastern war. Dubai, a global hub for gold trading connecting Europe, Africa, and Asia, saw its gold logistics network severely disrupted after the outbreak of war. Flight routes were interrupted, insurance became invalid, and physical gold was stuck in warehouses, unable to be transported. You can't carry a ton of gold bars through a war zone. Bitcoin, however, is the complete opposite—someone can cross borders carrying nothing but the memory of 12 mnemonic words, effectively bringing all their wealth with them. After the war broke out, the largest crypto exchange in Iran, Nobitex, saw a 700% surge in capital outflows. This isn't investors betting on Bitcoin; it's people voting with their feet during wartime, choosing the asset that's easiest to take with them.

Tiger Research noted in a report: "In financial terms, a 'safe haven' refers to an asset whose price remains stable during a crisis. This is completely different from 'an asset that can be used during a crisis.'" During this war, Bitcoin clearly belongs to the latter category.

No single factor can explain everything. But when combined, they help explain why Bitcoin performed better than most people expected in this war.

Putting these two narratives together, this war has produced two surprises.

The first surprise is gold. It fell at a time when it was supposed to rise. This war directly impacted energy supplies, triggering inflation instead of mere panic. Inflation expectations suppressed gold prices through interest rate dynamics. Gold's safe-haven function is not unconditional—when the pathway of war-induced crises leads to inflation and interest rates cannot decline, gold becomes trapped and stagnant. Another often-overlooked physical weakness is that physical gold is difficult to relocate during wartime.

The second surprise is Bitcoin. It rose at a time when it was supposed to fall. However, this doesn’t mean that Bitcoin has "matured" into a safe-haven asset. Its performance stems from a combination of multiple technical factors and structural advantages. Aurelie Barthere, Chief Research Analyst at Nansen, noted that Bitcoin's sensitivity to downward news from wars has visibly decreased. During the same period, the European Stoxx Index fell harder than Bitcoin. CoinDesk's analysis captures the essence: "Bitcoin is neither a safe haven nor purely a risk asset. It has become a 24/7 liquidity pool, absorbing shocks when other markets are closed, faster than anything else."

Each time news of war escalation emerges, Bitcoin still declines. It just falls less and rebounds faster each time.

Over the past five years, the market has told a simple yet compelling story: gold is the anchor in turbulent times, Bitcoin is digital gold.

The Middle Eastern war in March 2026 has unraveled this narrative.

Gold's millennia-old safe-haven reputation hasn't collapsed, but it revealed a weakness that is rarely clearly explained in textbooks: when the pathway of war-induced crises drives inflation instead of mere panic, interest rates have more influence than geopolitics. Bitcoin outperformed gold, but that doesn’t mean it has officially taken over the mantle of "safe-haven asset." Its rise was driven by oversold rebounds, structural advantages, institutional positioning, and wartime portability—four factors working simultaneously, not a formal market endorsement of its identity.

Future trends will depend on two variables: how long this war lasts and what decision the Federal Reserve ultimately makes. Gold and Bitcoin are betting on different outcomes of the same war, and the result is yet to be seen.

After this war, the term "safe haven" may need to be redefined. It’s no longer just a label for an asset class but instead a question about the dimension of time—are you hedging today's risks or betting on the world of tomorrow?

Gold and Bitcoin offer two entirely different answers.