Is the "Crypto Winter" Thawing? ETF Managers Weigh In as Bitcoin Shows Resilience Amidst Geopolitical Tensions

A notable comeback may be underway for Bitcoin, the flagship cryptocurrency. Just as Bitcoin was beginning its latest winning streak, ProShares’ Simeon Hyman, the firm’s global investment strategist, highlighted a bullish trend for the digital asset on CNBC’s "ETF Edge." Hyman pointed out that Bitcoin has shown resilience, even outperforming traditional assets like equities since the escalation of the conflict in the Middle East.

"If you look at bitcoin, it’s up a little bit and equities are down [since the Iran war began]," Hyman stated on Monday. "So, I think the diversification story really holds in this current environment."

As of the market close on Friday, Bitcoin had gained approximately 5% for the week, with the majority of these gains materializing within a concentrated 24-hour period. Furthermore, Bitcoin has appreciated by roughly 8% since the Iranian conflict commenced on February 28th. In contrast, the S&P 500 and gold have experienced declines of more than 3% since the onset of the war with Iran. The tech-heavy Nasdaq has also seen a downturn, falling more than 2% in the same timeframe.

ProShares, a firm actively involved in the cryptocurrency market, operates over a dozen cryptocurrency exchange-traded funds (ETFs). The company launched the ProShares CoinDesk 20 Crypto ETF (KRYP) just last month. This ETF has seen a nearly 5% increase since the war with Iran began, although it is down approximately 7% since its debut in early February.

Despite its recent positive momentum, Bitcoin remains significantly below its all-time high. The cryptocurrency is currently down more than 40% from its record peak of $126,198, which was established in October of the previous year.

Kim Arthur, founding partner and CEO of Main Management, views Bitcoin as being in a "classic crypto winter." This phenomenon, according to Arthur, typically occurs every four years and is characterized by a prolonged downturn in cryptocurrency prices. He believes that Bitcoin is currently in the "bottoming stage" of this cycle.

"Bitcoin was trading at $125,000 five months ago. So, it was down 50-plus percent when this conflict erupted," Arthur explained during the same interview. "I do like the fact that it’s outperformed a lot of other asset classes [since the war], but… you have to widen the lens a little bit on that."

Arthur, who holds an allocation to Bitcoin within his investment portfolio, indicated that he is currently adopting a passive investment approach toward the cryptocurrency.

"For myself as an asset allocator and a portfolio manager… I look at bitcoin as my benchmark, and then I bench everything else against that," Arthur commented. He further noted that Bitcoin has proven to be an exceptionally challenging asset to outperform, particularly since 2021.

Looking at a longer historical perspective, the digital currency has appreciated by approximately 15% over the past five years. This long-term growth, coupled with its recent resilience in the face of geopolitical uncertainty and market volatility, has led some analysts to believe that the "crypto winter" may indeed be starting to thaw, signaling a potential shift in market sentiment for Bitcoin and other digital assets. The performance of Bitcoin relative to traditional safe-haven assets like gold and risk assets like equities during this period suggests a potential evolving narrative for the cryptocurrency, with its role as a potential diversifier gaining renewed attention. The continued development of the cryptocurrency ecosystem, including the launch of new ETFs and ongoing institutional interest, could further contribute to its recovery and broader adoption.