With persistent tensions in the Gulf and intensifying Ukrainian attacks on Russian refineries, the price of Brent is holding above $100.

This cost is passing through to economies worldwide: inflation is becoming more deeply embedded in production processes, in the price of services, commodities, and so on. A sustained rise in Brent can therefore signal an economic slowdown, which constrains the liquidity available to markets, particularly the riskiest ones like Bitcoin.

Over the long term, we can see that when Brent settles into a strong upward trend, above its annual average, Bitcoin has often slowed down. Conversely, when Brent drops sharply, it has often coincided with a recovery for Bitcoin.

Note, as I mentioned in the preamble, that this is not a simple cause-and-effect relationship between Bitcoin and Brent. What can prove harmful to risk assets is the economic climate that comes with rising oil prices.

In July, we had a brief respite, and Bitcoin immediately took advantage of it. Brent has since rebounded strongly, however. I'm not saying Bitcoin can't keep up its momentum, since liquidity can rotate from one market to another, but economic conditions aren't very favorable for fresh liquidity to come in.

Written by Darkfost