The past four weeks have been brutal for Bitcoin As prices continue to follow comments from President Donald Trump, who is undecided on Iran.
One day he talks about peace and Bitcoin and risk assets rise while oil falls, and the next day he makes hawkish comments again causing Bitcoin to fall and oil to rise. Meanwhile, Iran declared the Strait of Hormuz “permanently closed” and analysts threw out wildly bullish and bearish oil targets. Navigating in such choppy conditions is nearly impossible.
Traders would be wise to focus on the following real indicators that really matter. Unfortunately, these do not paint a positive picture for risk assets including Bitcoin.
SPR cliff mid-April
The fate of the global economy and risk assets may depend on the coming weeks as managed disruptions to oil supplies threaten to turn into unmanaged disruptions.
After the outbreak of war with Iran on February 28, tanker traffic through the vital Strait of Hormuz, which handles about 20% of the world’s maritime oil trade, nearly collapsed. In response, the IEA’s 32 member countries agreed to release the largest coordinated strategic stockpile in its 50-year history – about 400 million barrels, later increased to 426 million barrels as more countries participated.
The emergency oil has made up for a supply gap of about 4.5 to 5 million barrels per day, a gap caused by the near shutdown of oil flows from Hormuz.
But now those reserves are expected to bottom out in the coming weeks, in which case the manageable deficit could double to about 10 to 11 million barrels per day – a projected deficit due to depleted reserves and disruption to normal flows.
The Saudi royal family described it as a “shock of unprecedented scale, with no obvious buffers to absorb it.”
So it doesn’t matter whether Trump continues or stops the war with Iran. If oil supply does not materially recover within the next two weeks, we may see massive risk aversion in both cryptocurrencies and traditional financial markets.
Ship insurance premiums via Hormuz
Ship insurance premiums are fees paid by ship owners to insurance companies to protect against financial losses that may occur during the operation of the ship.
Insurance costs for voyages in the Strait of Hormuz have increased significantly, with reports showing insurance rates jumping from less than 1% of the ship’s value before the war to 7.5% per voyage. This means that a ship worth US$100 million now has to pay around US$2-3 million in insurance, compared with US$250,000 before the conflict.
When premiums drop below 2%, it’s the clearest sign that the route is truly safer and it’s time to take risks in the market again. No Trump press conference, briefing, or truth-telling social post can replicate the certainty embedded in these prices.
Tanker transportation
Trump sometimes has suggestion Passage through the Strait of Hormuz is assured, but so far there is no clear evidence that tanker traffic has returned to normal levels.
In fact, only 21 oil tankers have passed through the Strait of Hormuz since the war began, compared with more than 100 per day before the conflict, according to S&P Global Market Intelligence.
A sustainable rally in risk assets will require a sharp recovery in this number; until then, Trump’s efforts to calm markets may be short-lived.
