If nothing else, the war in Iran has revealed the true value of Bitcoin (BTC). We already knew it wasn’t worth much as an inflation hedge. When inflation began surging a few years ago, Bitcoin fell sharply. And once inflation began to subside, Bitcoin rallied.

In the first case, Bitcoin peaked around $69,000 in November 2021 just as the Consumer Price Index (CPI) was beginning its ascent towards a 9.1 percent annual growth rate recorded seven months later. While that was happening, Bitcoin fell below $20,000.

And by the time the Fed started reducing its policy rate in September 2024, Bitcoin had rallied back above $66,000. If you bought Bitcoin as an inflation hedge, it didn’t do you much good. In fact, it hurt you.

We also know Bitcoin isn’t worth much as a hedge against geopolitical tensions, either. The timing of Russia’s invasion of Ukraine coincided closely to the rise in inflation. We already know how that worked out.

On the day Russia commenced military hostilities in Ukraine (February 24, 2022), Bitcoin closed near $38,000. Six months later, when it was apparent there would not be a quick resolution to that conflict, Bitcoin was down to $21,000.

Digital Fools’ Gold

When Israel and the United States commenced a coordinated military attack against Iran two weeks ago, Bitcoin was back up to $67,000. Last week, it closed around $70,000.

A five-year chart of Bitcoin (below) reveals how erratic this cryptocurrency has been recently. It has traded above $120,000 and below $20,000, all within that timeframe.

However, there has been one consistency in Bitcoin’s otherwise erratic history. Ultimately, it returns to $70,000. The chart above makes that clear, as that price has acted as both technical resistance and support on several occasions (circled).

If you bought Bitcoin five years ago and held onto it, your gain at the end of last week would have been approximately 22 percent. Over the same span, the S&P 500 Index gained 69 percent. Gold did even better, appreciating 196 percent.

So much for the argument that Bitcoin is digital gold. Digital fool’s gold is more like it. If ever there was a time for Bitcoin to literally rise to the occasion, now would be it. So far, it has barely budged.

Trust Issues

It is not fair to judge an asset class over a short period of time. There are other variables that can affect their values. The war in Iran isn’t the only thing happening in the world right now. However, it is arguably the most consequential event in the near term for the global financial markets.

But over a five-year span, an asset class should demonstrate its true character. When inflation was on the rise, so were commodity prices. That’s why I recommended an “Inflation Friendly Portfolio” to my readers in February 2022 that included The Fidelity Global Commodity Stock Fund (FFGCX).

At that time, FFGCX was trading around $18. Two months later it rose above $22 before leveling off. It traded sideways for the next three years, then shot above $28 last week after crude oil soared above $100 a barrel. That is the way a hedge is supposed to behave.

Implicit in the usage of a hedge is that it can be trusted to react a certain way given a set of conditions. If that is not the case, then what you really own is a speculative investment.

We have not learned much over the past two weeks, but we do know one thing. Whatever Bitcoin is it is not a hedge against bad news.

What we can say with some degree of certainty is that Bitcoin is worth about $70,000. If it gets a lot cheaper than that then it is probably worth buying. And it gets a lot more expensive than that I would let someone else have the pleasure of owning it.