A crypto market crash is underway, with Bitcoin price plunging to $103,885, down from the year-to-date high of $111,900. The market capitalization of all cryptocurrencies plunged to $3.2 trillion, while liquidations jumped to over $300 million.
Most altcoins have plunged, with Ethena (ENA), Fartcoin, Lido DAO, Virtuals Protocol, Bonk, and Celestia being the most affected. Ethena plunged by almost 18%, while Fartcoin and Lido fell by over 17%. There was no major top-100 cryptocurrency that was in the green on Friday morning.
Bitcoin and altcoins plunged as geopolitical risks rose following Israel’s attack on Iran. The attack on Iran’s nuclear projects came after the International Atomic Energy Agency board of governors ruled that Iran was not complying with international obligations.
The crashes of Bitcoin and altcoins coincided with those of other risky assets. US stock index futures plunged, with the Dow Jones and Nasdaq 100 falling by over 700 and 400 points, respectively.
European index futures like the German DAX, FTSE 100, and CAC 40 fell by more than 1%, while Asian indices like the Hang Seng and Nikkei 225 plunged by over 1.5%. In a note, an IG analyst said:
“While we await further news and a potential response from Iran, we are likely to see a further deterioration in risk sentiment as traders cut risk seeking positions ahead of the weekend.”
The crisis in the Middle East is expected to have a negative impact on cryptocurrencies due to its effect on the crude oil market. Indeed, Brent and West Texas Intermediate oil prices jumped by over 12% after the attacks. Brent jumped to $78, while WTI moved to $76, and natural gas jumped by 2%.
Higher oil prices are likely to have an impact on inflation and prompt the Federal Reserve to maintain a cautious tone. Historically, cryptocurrency prices tend to perform well when the Fed is somewhat dovish.
On the positive side, Bitcoin is slowly emerging as a safe-haven asset because of its rising demand and falling supply. ETF demand continues rising, while supply on exchanges and over-the-counter venues has plunged.
Therefore, there is a likelihood that Bitcoin and other altcoins will stabilize after the knee-jerk reaction following the attack. In fact, past data, as cited by BlackRock, shows that Bitcoin holds up better than stocks following a major geopolitical issue.
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