By Tom Blitzer
Key Insights:
- Bitcoin’s 8.4% plunge marks its sharpest decline since March 2023, signaling investor anxiety amid renewed geopolitical conflicts.
- Around $1.5 billion in crypto bets were liquidated over the weekend as Middle East tensions shook global risk markets.
- Despite a brief recovery, Bitcoin remains $10,000 below its record high, reflecting slowed inflows into crypto exchange-traded funds.
Bitcoin’s price drops sharply by 8.4% following an attack by Iran on Israel, escalating Middle East tensions and impacting the broader cryptocurrency market.
After an Iranian drone attack on Israel, the cryptocurrency market saw a sharp decline that resulted in a widespread sell-off of digital assets.
During the weekend, digital coins were among the few riskier assets that were traded, and their decline was interpreted as a first response to the escalation of tensions in the Middle East.
With its 7.7% fall on Saturday, Bitcoin, the biggest cryptocurrency, experienced its biggest decline since March 2023.
While the token recovered some of its losses and was trading at roughly $64,000 on Sunday, losses over 24 hours also befell other significant coins like Ether, Solana, and Dogecoin.
Iran Retaliates Against Israel for Syria Strike
Iran launched an attack using drones and missiles that was perceived as a form of retaliation for a strike in Syria that claimed the lives of senior Iranian military officials.
Due to the increasing violence in the area, there was a sense of unpredictability on Friday that permeated traditional markets and extended into the cryptocurrency market over the weekend.
Before traditional markets reopen on Monday, investors can gain insight into market sentiment by following the continuous trading of cryptocurrencies.
It is important to remember that during this time, things can change suddenly.
Stocks suffered as a result of the tension between Iran and Israel, which led investors to seek refuge in US dollars and bonds.
One of the biggest two-day liquidations in at least six months, Coinglass data showed that throughout Friday and Saturday, roughly $1.5 billion worth of bullish cryptocurrency wagers using derivatives were liquidated.
The considerable decline in the price of digital assets during this time was partly caused by the market’s high degree of leverage.
The price of bitcoin is currently around $10,000 less than its record of $73,798 set in mid-March.
Additionally, the token reached an all-time high earlier this year thanks to the introduction of specialized US exchange-traded funds (ETFs), but recent inflows into these products have slowed down.
Why Are Altcoins and BTC Dropping?
After a few minutes, there was an announcement that caused Bitcoin to drop dramatically. Today, Iran announced that the attacks had ended and that it had taken the appropriate action. But just a moment ago, Israel declared that it would react to Iran’s most recent attacks in a day or two.
There will be substantial losses in risk markets if Middle East tensions keep rising. In the past 24 hours, hundreds of missiles and drones have been sent to Iran in response to Israel’s killing of senior Iranian commanders. But practically all of these were lost in the air. Israel’s latest statement, which heightens the tension, is reminding investors of something that happened on February 24, 2022.
Israel was advised not to reply to Iran in the US statement released today. Expected announcements in the next few hours could cause the market to become even more volatile. In particular, we might witness strong sales in the spot Bitcoin ETF channel tomorrow when US markets open.