The cryptocurrency market, particularly Bitcoin, has seen significant declines following the latest escalation in Middle Eastern conflict. Investors are reacting to uncertainty, leading to sharp market fluctuations.
Impact of Price Drop
On Thursday, Bitcoin's price fell below $105,000, with the total cryptocurrency market capitalization dropping to $3.26 trillion. Liquidations surged by 252% over the past 24 hours, exceeding $1.15 billion, resulting in 247,950 traders being liquidated.
Most altcoins underperformed relative to Bitcoin, with the SPX6900 token plummeting by 20%, while Fartcoin, Celestia, and Bonk saw declines of over 15%.
Market Reactions to the Conflict
Israel’s attack on Iranian nuclear sites is impacting the cryptocurrency market by inducing fear among investors. A prolonged conflict could lead to higher oil prices, potentially worsening the economic outlook. On Friday, both Brent and West Texas Intermediate oil prices increased by over 10%.
Such conditions may compel the Federal Reserve to maintain higher interest rates, negatively affecting riskier assets like cryptocurrencies.
However, historical trends indicate that after such 'black swan' events, Bitcoin and other altcoins often recover following initial drops.
Bitcoin's Technical and Fundamental Indicators
Despite the downturn, Bitcoin retains strong technical and fundamental indicators. Demand for Bitcoin is increasing, especially among ETFs. For instance, BlackRock’s IBIT now manages over $72 billion in assets.
Data from Santiment shows that Bitcoin's supply on centralized exchanges has decreased to 1.2 million, down from 1.5 million in January. This reduction in supply could positively influence future prices.
There is a possibility that Bitcoin and other cryptocurrencies will bounce back as current investor fears subside. Historical data suggests Bitcoin tends to rebound from significant drops, indicating potential for future growth.
