Bitcoin's strength amid geopolitical tensions comes from oversold and underowned conditions - K33

Bitcoin (BTC) traded horizontally on average over the past week amid heightened geopolitical tensions, rising about 2% to hover near $69,987 on Tuesday?.

In a report on Tuesday, K33 Head of Research Vetle Lunde noted that the top crypto outperformed several traditional assets last week, even as global financial markets reacted to escalating geopolitical tensions in the Middle East.

Bitcoin outperforms traditional markets as geopolitical tensions impact prices

Despite the turbulence, Bitcoin recorded a cumulative gain of approximately 5.7% since late February. In contrast, the Nasdaq Composite declined about 0.39%, while the S&P 500 and Gold each fell roughly 1.7% over the same period. Bitcoin also briefly climbed to $74,200 last week before pulling back as traders reduced exposure amid ongoing geopolitical developments.

"This relatively strong performance is a welcome development after months of underperformance. We reiterate our view that the relative strength stems from BTC being underowned, heavily shorted, and significantly oversold," Lunde wrote in the report.

K33 highlighted that perpetual futures funding rates have turned negative, averaging around -0.78% over the past 30 days and reaching daily lows of -3.8%. Historically, such conditions have sometimes preceded accumulation phases, as they make long positions relatively more attractive.

On the Chicago Mercantile Exchange (CME), Bitcoin futures open interest dropped to about 100,780 BTC, the second-lowest level in over two years. Premiums on futures contracts remained relatively modest at around 4–6%, while options data showed rising implied volatility and increased demand for downside protection, the report highlighted.

Perpetual futures open interest also saw significant fluctuations, including a single-day increase of 24,000 BTC on March 5, marking the largest rise since April 2023, followed by rapid reversals.

Additionally, K33 noted that the top crypto reached a milestone, exceeding a circulating supply of 20 million BTC, with roughly 1 million BTC remaining to be mined over the coming decades as block rewards continue to decline through scheduled halving events. While the milestone reinforces Bitcoin's scarcity narrative, Lunde noted that market dynamics remain influenced by early holders gradually distributing coins and new institutional entrants increasing exposure through regulated investment vehicles.

Despite that, Lunde added that it may be too early to conclude on the digital gold narrative.

"Bitcoin's core investment appeal, its scarcity, naturally draws comparisons to Gold. Yet these parallels quickly fade when comparing the performance of the two assets, leading many to question the validity of the digital gold narrative," Lunde added.

Meanwhile, spot Bitcoin exchange-traded funds (ETFs) recorded their strongest weekly inflows in roughly five months, adding a net 1,623 BTC last week despite outflows in the latter half of the week.

Bitcoin is trading at $69,900, up 1.2% over the past 24 hours as of writing on Tuesday.