Record-high Oil Prices May Precede Bitcoin Price Crashes

Key takeaways:

• $105 WTI crude often triggers Bitcoin price corrections, with history showing a 14% to 27% sell-off within weeks.

• The BTC to oil correlation remains uncertain as events like Mt. Gox and the Terra-Luna collapse likely deepened previous crypto bear markets.

Oil prices surged to $105 on Monday, reaching their highest level in nearly four years. Historically, this specific threshold has aligned with major Bitcoin (BTC) price corrections. However, since these occurrences only took place once in 2014 and twice in 2022, a more granular analysis is required to determine if current market fears are justified.

Are $105 oil prices a bearish signal for Bitcoin?

On June 12, 2014, West Texas Intermediate (WTI) climbed above $105 after the Islamic State (ISIS) advanced into northern Iraq and captured Mosul and Tikrit.

While the price action in the first week was muted, Bitcoin faced a 21% correction in less than 10 weeks, falling to $468 from $600. It would take over two years for Bitcoin to reclaim the $600 level. The next instance would happen almost 8 years later. On March 1, 2022, WTI prices surged above $105 following the escalation of the Russia-Ukraine war.

Bitcoin price faced a 14% correction within seven days, trading down to $38,100 from $44,370 on March 1, 2022. However, the losses were entirely reversed within less than a month, despite oil prices remaining above the $105 level. 

2022 Russian oil embargo’s impact on Bitcoin price

The most recent instance of WTI oil prices surging above $105 occurred on May 4, 2022, after the European Commission formally proposed a phased-in embargo on all Russian oil imports.

Bitcoin prices faced a steep 27% crash over the next 7 days, and investors endured a much longer bear market as its price entered a 19-month bear market before finally reclaiming the $39,700 level. While oil prices remained below $100 for several years, they returned to triple digits this week.

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US President Donald Trump said that his preference would be for the US to control the oil industry in Iran “indefinitely,” according to Yahoo Finance. While $105 oil is seen as a bearish sign for Bitcoin, three events in 12 years do not prove a correlation.

Other factors, like the Mt. Gox exchange liquidation in February 2014 and the Terra-Luna ecosystem collapse in May 2022, likely caused those prolonged bear markets. Thus, pinning a Bitcoin crash on an arbitrary oil price threshold seems far-fetched.