Bitcoin drops below $9900 after U.S. strikes on Iran cause crypto market downturn
Bitcoin experienced a significant sell-off last weekend, dropping below the $99,000 mark and hitting its lowest level since May. This sharp decline was triggered by rising tensions in the Middle East and renewed inflation concerns affecting digital assets. As Bitcoin plummeted, other cryptocurrencies like ether, Solana, XRP, and dogecoin also experienced steep losses, leading to an overall downturn in the crypto market.
Despite the initial drop, digital assets started to rebound as Bitcoin was trading just under $101,000, only down by 1% within a 24-hour period. Meanwhile, ether had also managed to recover slightly, sitting at around $2,200, down 2.5%. The sell-off was influenced by a mix of geopolitical volatility and macroeconomic uncertainties.
The possibility of Iran blocking the vital Strait of Hormuz, which handles a significant portion of global oil supply, contributed to the inflation fear. JPMorgan expressed concerns that a complete closure of this shipping lane could drive oil prices up to $130 per barrel. Some macro research firms predict that such a scenario could potentially push U.S. inflation back towards 5%, reaching levels not seen since March 2023. This anticipation has led traders to reconsider interest rate trajectories and shift away from speculative assets like cryptocurrencies.
Although Bitcoin is usually marketed as an inflation hedge, it has been behaving more like a high-beta tech stock lately. Recent data from crypto data provider Kaiko show that Bitcoin’s correlation with the tech-heavy Nasdaq has significantly increased, indicating that it now resembles a risk asset more than an inflation hedge. Alongside this shift, institutional investor behavior has also changed.
Spot bitcoin ETF inflows had been increasing steadily until late last week when institutional investors became more cautious amid U.S. President Donald Trump’s response to the Iran situation. As inflows into spot bitcoin ETFs nearly froze, more than $1 billion in crypto positions were liquidated within 24 hours, with the majority coming from overleveraged long positions. The technical breakdown further exacerbated the sell-off, causing forced liquidations across offshore derivatives platforms, including Binance and Bybit.
The market’s response to the geopolitical tensions and inflation fears underscores how sensitive digital assets are to external factors. Bitcoin’s erratic behavior and correlation with tech stocks highlight the evolving nature of this asset class and the need for caution among traders and investors.
