This note from Lyn Alden seems relevant to your step by step comment:

A couple months ago I had a discussion with the head of digital assets at a multi-trillion AUM financial institution about the topic of whether bitcoin is a risk-on asset or a risk-off asset.

This wasn’t about what it is conceptually (i.e. globally portable finite bearer assets are conceptually good to own in a crisis, neither of us disagreed on this), but rather how its price would actually behave in a crisis currently and for the next several years.

Their view was that it could be marketed as a risk-off asset, meaning something that is likely to go up in a crisis, and that if marketed this way it would allow them to put bitcoin ETFs into more portfolios and weight it bigger.

My view was that while of course people should own bitcoin, it’s not yet a risk-off asset in practice in terms of price action, and that marketing it that way is likely to lead to disappointment for those that expect it to perform like that.

We then got into a discussion about how bitcoin went up in the March 2023 banking crisis. They suggested that this is evidence of emerging risk-off behavior, to their point.

I disagreed, and clarified that in my analysis the closest correlation to bitcoin price action is measures of global liquidity. Some types of crises are pro-liquidity and some are anti-liquidity, and will likely affect bitcoin’s price accordingly.

The March 2023 banking crisis was a pro-liquidity event because it was quickly apparent that the Fed/Treasury would bail banks out fast and slow their rate hikes. Therefore, bitcoin went up not because it was a risk-off asset per se, but rather because it behaved as a pro-liquidity asset as it frequently has.

The Iran/Israel event this weekend was an anti-liquidity crisis because it contributed to a flight-to-safety move toward the dollar (i.e. the unit of account for which the most debt is denominated in, and debt represents inflexible demand for that unit). A sharp move up in the dollar is bad for global liquidity because it hardens the debts of various foreign entities (sovereigns and corporations) relative to their cash flows (which are to varying degrees partially or completely denominated in fiat units other than the dollar). And so bitcoin behaved as it normally does: it went down amid falling global liquidity.

At this stage (with its relatively small size, high volatility, and poor understanding of most people for the asset), I continue to view bitcoin price action as likely to be pretty correlated with global liquidity for a while. Understanding that dynamic is helpful when communicating expectations to people and when determining which types of crises are likely to push its price up or down. Yes, bitcoin is a risk-off asset conceptually, but in practice in terms of macro price action it is still a pro-liquidity asset primarily.

When bitcoin price action starts to behave differently from that trend, I’d be happy to report on that observation.