Bitcoin Slides Below $99,000 Amid Rising Middle East Tensions
Over the weekend, Bitcoin experienced a significant drop, dipping below $99,000 for the first time in over a month. This downturn reflected a sharp sell-off within the broader digital asset space, stirred by escalating geopolitical risks in the Middle East and renewed inflation concerns.
Widespread Crypto Sell-Off Fueled by Geopolitical Risks
Alongside Bitcoin, Ether saw its price plunge by more than 10% at one point, marking a stark reaction as investors priced in the threat posed by rising tensions. Other major cryptocurrencies followed suit, collectively pulling the entire market downwards.
By late Sunday, the market showed signs of recovery. Bitcoin rebounded to just under $101,000, recording a modest 1% decline over 24 hours. Meanwhile, Ether regained some ground and traded around $2,200, down roughly 2.5%.
Strait of Hormuz Threat Sparks Oil and Inflation Fears
The turmoil traces back to Iran’s reported threats to block the Strait of Hormuz—a critical maritime passage handling about 20% of global oil supply. Analysts warn that a full closure could send oil prices soaring sharply higher, potentially pushing U.S. inflation rates back toward 5%, a level not witnessed since early 2023.
Such a spike in inflation has prompted traders to reassess interest rate trajectories, leading to a rotation away from volatile, speculative assets like cryptocurrencies.
Bitcoin’s Shifting Role: From Inflation Hedge to Risk Asset
Despite often being touted as a hedge against inflation, Bitcoin currently mirrors high-risk technology stocks. Its correlation with the tech-heavy Nasdaq index has surged in recent weeks, climbing from a multi-month low earlier this year. This period coincided with a significant increase in inflows to spot Bitcoin ETFs, suggesting changing investor sentiment.
Institutional Investors Pull Back Before Escalation
Institutional activity also shifted dramatically last week. From Monday to Wednesday, spot Bitcoin ETFs attracted over $1.04 billion in investments. However, inflows came to a halt on Thursday, falling to zero, and only marginally increased by $6.4 million on Friday. This cautious stance emerged just as the U.S. signaled a strong response to Iran and announced a surge in options trading related to the region's tensions.
Forced Liquidations Amplify Market Decline
Technical factors exacerbated the sell-off. Breaking below the $99,000 mark triggered forced liquidations across major offshore derivatives platforms, including Binance and Bybit. During the peak 24-hour window on Sunday, more than $1 billion in cryptocurrency positions were liquidated, with over 95% arising from long bets—highlighting how overleveraged traders were.
What This Means for Crypto Investors
This episode serves as a reminder of the fragility of cryptocurrency markets amid heightened geopolitical tensions and macroeconomic uncertainties. As Bitcoin increasingly behaves like a high-beta risk asset, investors are shifting strategies, seeking to balance exposure with caution.
