Bitcoin Plummets: Iran Cyber Attack Triggers Crypto Market Sell-Off
bitcoin and Crypto Market Plunge Amid Rising Geopolitical Tensions
bitcoin Hits Lowest Point Since May
Over the weekend, bitcoin experienced a significant decline, reaching its lowest value since May. This downturn was primarily driven by escalating tensions in the Middle East and renewed concerns about inflation, leading to a widespread sell-off in the cryptocurrency market.
Market Reaction to Geopolitical Events
On Sunday, bitcoin fell below the $99,000 threshold, marking its lowest point in over a month. Ether also faced a steep decline, dropping more than 10% at one stage, as the digital asset market reacted swiftly to increasing geopolitical risks. Other cryptocurrencies, including Solana, XRP, and Dogecoin, also suffered substantial losses, contributing to a sharp downturn across the entire crypto sector.
Signs of Recovery in Digital Assets
By late Sunday, there were signs of recovery in the digital asset market. bitcoin was trading just under $101,000, reflecting a modest decline of 1% over the previous 24 hours. Ether managed to reduce its losses, trading around $2,200 after a 2.5% drop.
The Impact of Geopolitical and Economic Factors
The recent sell-off appears to be a combination of geopolitical shocks and macroeconomic worries. Reports indicate that Iran has threatened to obstruct the Strait of Hormuz, a crucial shipping route responsible for approximately 20% of the global oil supply. JPMorgan has cautioned that a complete closure of this route could push oil prices up to $130 per barrel.
Inflation Concerns Resurface
A prominent macroeconomic research firm has suggested that such an increase in oil prices could drive U.S. inflation back toward 5%, a level not seen since March 2023, when the Federal Reserve was still actively raising interest rates. This outlook has prompted traders to reevaluate interest rate trajectories and shift away from speculative investments like cryptocurrencies.
bitcoin‘s Correlation with Tech Stocks
While bitcoin is often viewed as a hedge against inflation, its recent behavior resembles that of high-beta technology stocks. According to data from crypto analytics firm Kaiko, bitcoin‘s correlation with the tech-heavy Nasdaq has surged in recent weeks, following a period of increased inflows into spot bitcoin ETFs.
Institutional Investment Trends Shift
Institutional investment patterns have also shown signs of change. More than $1.04 billion flowed into spot bitcoin ETFs from Monday to Wednesday last week, as reported by CoinGlass. However, these inflows dwindled as the weekend approached, with no net movement on Thursday and only $6.4 million on Friday. This decline coincided with President Donald Trump’s early departure from the G7 summit and the announcement of a two-week review of U.S. options regarding Iran.
Technical Factors Fueling the Sell-Off
The technical breakdown in the market exacerbated the sell-off. Research from CoinGlass indicates that bitcoin‘s drop below $99,000 triggered forced liquidations across offshore derivatives platforms like Binance and Bybit. At the peak of the sell-off on Sunday, over $1 billion in crypto positions were liquidated within a 24-hour period, with more than 95% of these liquidations stemming from long positions, highlighting the market’s overexposure leading into the weekend.
