A New Competitive Order: Mapping Crypto Resilience in the "Age of Competition"

As the global landscape undergoes a structural shift driven by bloc economic rivalry, intensified competition for critical technology, and an increasingly volatile mix of political agendas and military conflicts, the "Safe Haven" debate has been reignited. This renewed instability has brought a sharp focus back to a fundamental question: how do cryptocurrencies actually respond to geopolitical shocks?

Chart 1: Geopolitical Risk Index 

Source: Caldara, Dario and Matteo Iacoviello (2022), “Measuring Geopolitical Risk,” American Economic Review. 

Capital flight and the transmission of global chaos

Geopolitical risks do not merely nudge the market; they trigger seismic reallocations of capital and abrupt, often violent, price corrections. According to the International Monetary Fund (IMF), the fallout depends on a complex matrix of variables: the specific characteristics of the shock, the affected asset class and the geographical sector involved. Crucially, both the severity and the longevity of the event dictate the depth of the market scarring.
 

The supply-side hammer: Lessons from 2022

The 2022 invasion of Ukraine serves as a clinical example of a geopolitical event acting as a powerful supply-side shock. By weaponizing energy and agricultural exports, the conflict pushed commodity prices to extremes while simultaneously crushing equity markets under the weight of stalled growth and ballooning operational costs.

These shocks spill over into the broader financial system by tightening credit conditions and spiking volatility. While energy giants and commodity-exporting nations often harvest windfalls from these price surges, the aggregate effect is a systemic tightening that threatens traditional portfolios.

The pricing paradox and the "heuristic trap"

Pricing geopolitical risk remains one of the market's greatest challenges. The IMF notes that these events are inherently unique, characterized by uncertain durations, shifting scopes and a statistical rarity that makes historical modelling difficult.

In regions with limited financial development, empirical evidence suggests a dangerous delay in market reactions. Investors often fall into "heuristic traps", relying on mental shortcuts or losing interest as risks persist, only to face a brutal market blowout when those risks finally materialize. We saw this play out with the Liberation Day announcement: despite trade protectionism being a cornerstone of the Trump administration's agenda, the eventual market correction was a sudden and devastating blowout.

Mapping risk transmission

The 2025 IMF Global Financial Stability Report provides the definitive framework for how geopolitical tension is converted into asset price volatility. This transmission occurs through two primary conduits:

Chart 2

Source: IMF (2025) Global Financial Stability Report, April 2025, Geopolitical Risks: Implications for Asset Prices and Financial Stability; Sandmark Analysis.

1. The economic channel: Physical disruption

In this channel, the threat or realization of trade restrictions, financial sanctions or infrastructure damage strikes the supply chain directly. The result is an aggregate decline in demand and a reversal of capital flows that forces a repricing of everything from traditional stocks and bonds to physical assets and cryptocurrencies. Beyond the direct hit, this channel indirectly poisons asset prices by increasing inflationary pressures and stifling real economic growth.

2. The market sentiment channel: The psychology of fear

This channel operates on pure anticipation. Macroeconomic uncertainty can spike even in the absence of a kinetic conflict or policy shift, as investors preemptively price in risk and confidence evaporates. As asset valuations drop, liquidity dries up, increasing credit risks across the financial sector. In a worst-case scenario, this triggers a lethal cycle of margin calls and fund withdrawals, leading to the kind of "fire sales" that threaten the stability of the entire global financial architecture.

The sentiment machine: Decoding the crypto market’s behavioural DNA

The cryptocurrency market operates on a structural and behavioural logic fundamentally distinct from traditional financial systems. According to Wanidwaranan et al. (2025), these unique characteristics define its role as an attractive, albeit volatile, hedging asset.

Valuation vacuum

Unlike equities or bonds, the crypto sector lacks clear regulation, consistent transparency and reliable valuation models. This absence of "fundamental" anchors leaves investors heavily dependent on two primary drivers: technical analysis and market sentiment. Without price stability or straightforward asset structures, the market becomes a pure play on collective belief.

Echo chambers and digital influence

In this environment, social media platforms and digital communities do not just discuss the market—they create it.

• Influencer Impact: Market influencers and online communities play a pivotal role in shaping trader expectations, which rapidly manifest as aggregate market sentiment.

• Narrative Reinforcement: Digital networks facilitate the formation of "echo chambers" where shared narratives are reinforced, amplifying collective thinking and promoting crowd-based decision-making.

• Sentiment Indicators: Consequently, shifts in dominant online narratives and spikes in social media activity serve as highly informative indicators of impending price dynamics.

Experience gap and herding behaviour

The demographic profile of the crypto market introduces a significant psychological variable. Participants are generally younger and less experienced than traditional asset class investors, heightening the market's exposure to fear, overreaction and panic during periods of high volatility.

The decentralized structure of these markets further complicates the risk profile. While it enables rapid capital reallocation and lowers transaction friction, it also increases vulnerability to herding behaviour and imitative trading, especially under extreme market stress.

Geopolitical stress and the FOMO reflex

Geopolitical tensions act as a catalyst for risk aversion, forcing investors to re-evaluate their portfolios. During these periods, capital flows are dictated by a binary perception: is the asset a safe haven or a speculative gamble?

• Intuitive Herding: Market-wide herding becomes both common and intuitive as uncertainty rises.

• The FOMO Loop: Heightened volatility attracts less-informed traders "chasing" price movements out of fear of missing out (FOMO).

• The Contrarian Guard: Simultaneously, more experienced participants often respond by taking contrarian positions, further deepening the volatility.

Wanidwaranan et al. (2025) conclude that this herd behaviour is most evident in response to geopolitical threats. These effects are asymmetric, proving significantly stronger during bearish market conditions. Interestingly, while threats linger in the sentiment, the actual influence of geopolitical actions tends to dissipate rapidly as the market quickly absorbs the "new normal" of the event.

Crypto – a hedge, safe haven, or...? 

The structural foundation for analysing asset responses to global instability is the Caldara and Iacoviello (2022) framework. They define geopolitical risk as the threat, realization and escalation of adverse events, such as wars, terrorism, and interstate tensions, that disrupt the peaceful conduct of international relations. Their Geopolitical Risk (GPR) Index is built via daily news-based text searches across ten major newspapers and is divided into two critical sub-indices:

• Threat Index: Encompasses war, peace, military, nuclear and terrorist threats.
• Act Index: Includes the beginning of wars, the escalation of conflicts and realized terrorist acts.

The "fear gauge" vs. realized shocks

Empirical studies using this framework present a nuanced, and often contradictory, picture of crypto's resilience:

• Yilmazkuday (2024): This study found that major assets like BTC, BNB and BCH react negatively and significantly to geopolitical threat shocks on the same day. A one-standard-deviation increase in threat levels reduced daily returns by up to 0.14% for BTC, 0.23% for BNB, and 0.26% for BCH. Conversely, no significant response was observed for geopolitical acts, leading to the conclusion that crypto is not a reliable hedge.
• Kamal and Wahlstrøm (2023): Analyzing hourly data during the Russian invasion of Ukraine, they found that returns and liquidity fell more sharply after the actual escalation (acts) than during the prior threat phase. This sharply contrasts with equity markets, which typically price in the "threat" more heavily than the realization.
• Long et al. (2022): Covering 2,000 coins, they developed a geopolitical beta measure, finding that low-beta coins significantly outperformed high-beta counterparts, allowing sophisticated investors to harvest a "geopolitical premium".

Market cycle and asset comparison

The effectiveness of crypto as a "Safe Haven" appears highly dependent on broader market conditions:

• Colon et al. (2021): Their research suggests crypto can act as a hedge in many cases but lacks consistency across cycles. They noted that crypto offers safe-haven traits against threats during bull markets, but only against acts during extreme bear markets.
• Xu and Kinkyo (2023): While Bitcoin can serve as a short-to-medium-term diversifier for G7 equities, Gold remains the vastly more reliable long-term hedge, showing consistent performance throughout both the COVID-19 pandemic and the early stages of the Russia-Ukraine war.
• Mamun et al. (2020): This study identified geopolitical risk as the dominant driver of Bitcoin’s volatility and risk premia. Their analysis concluded that during periods of high policy uncertainty, Bitcoin investors can effectively hedge only with Gold, rather than other financial assets.

Behavioural verdict: Anticipation over reality

Recent evidence from Wanidwaranan et al. (2025) highlights that geopolitical risk triggers strong, asymmetric behaviour in crypto markets, where herding is driven primarily by threats rather than realized events. This effect is most pronounced during bear markets and periods of extreme stress, where falling prices amplify fear and "imitative" trading.

Taken together, the empirical evidence offers little support for the idea of cryptocurrencies as a consistent "Safe Haven". Instead, they appear more sensitive to uncertainty and anticipation than to realized shocks, often amplifying risk during downturns. Performance remains tightly bound to global sentiment, reinforcing the view that digital assets are primarily speculative instruments rather than a reliable refuge in times of deep crisis.

Crypto after geopolitical shocks

To move beyond the theoretical, Sandmark conducted an empirical autopsy of the top ten cryptocurrencies and gold from 1 Jan 2019 to 12 Jan 2026. By defining "large" shocks as two-standard-deviation innovations in the GPR index, we tracked how digital wealth responds across three critical horizons: the same-day reaction, the 7-day short term and the 30-day medium term.

Aggregate shocks and the 30-day persistence

The aggregate data show a broadly positive but uneven response to major geopolitical shocks. On the day an event is announced, statistical significance is a luxury reserved for the heavyweights. Only Bitcoin (BTC) and Binance Coin (BNB) show significant same-day returns, proving that immediate defensive capital flows are concentrated in the most liquid, institutional-grade tokens.

 

However, the "Digital Gold" narrative finds its footing in the medium term. By the 30-day window, the relationship between geopolitical stress and returns strengthens significantly. BTC, BCH, SOL, BNB and ETH all exhibit positive and statistically significant returns at the 10% level. This suggests that geopolitical shocks do not just trigger "flash" price moves; they translate into persistent gains for the major assets as the market digests the new risk reality.

 

Threat response: A selective bid

When we isolate geopolitical "threats", the rhetoric, the buildup and the posturing, the market response becomes highly heterogeneous. On the day a threat spikes, the bid is led by a specific subset of assets: Monero (XMR), TRON (TRX), BNB and XRP all record significant positive returns.

Beyond the immediate panic, the bid becomes selective. Solana (SOL) emerges as a short-term leader with significant returns over the 7-day horizon, while Ethereum (ETH) exhibits a delayed but significant positive effect at the 30-day mark. This reinforces the idea that there is no uniform "hedging" response to threats; instead, capital rotates through different chains based on timing and liquidity.

 

Act response: The fade and the gold standard

When threats turn into "acts", the actual realization of war or terror, the crypto response is surprisingly weak and transitory. While most tokens post a green candle on the day of an event, the statistical significance is marginal, and the effect almost always fades within the 7-day and 30-day windows. Any "safe haven" behaviour in crypto following a realized event is fragile and short-lived.

This is where the contrast with the old guard is most striking. Gold remains the only asset to exhibit positive and statistically significant returns across every single horizon during realized geopolitical stress. While crypto acts as a barometer for anxiety, gold remains the shield for the strike.

Opportunistic hedge

Our analysis suggests that Bitcoin and the major altcoins can act as "weak safe havens" during large shocks, particularly when risk materializes as a realized act. However, the evidence does not support a universal or permanent defensive role.

Rather than stable sanctuaries, cryptocurrencies function as opportunistic hedging instruments. Their effectiveness is entirely dependent on the nature of the shock and the prevailing market conditions. For the asset-allocator, crypto offers short-term diversification benefits during acute stress, but it has not yet replaced gold as the consistent anchor for a portfolio in a world at war.