Bitcoin has bounced back from its biggest drop in over a year, signaling possible wider market fluctuations as tensions rise in the Middle East.
The leading cryptocurrency surged up to 5.9%, reaching around $64,600 by late Sunday morning in London. Other smaller cryptocurrencies, including Polkadot and Uniswap, saw increases over 10%, and Ether was up by 5%.
This market movement follows Iran's drone and missile strikes against Israel, a retaliation for a previous strike in Syria that killed top Iranian military officials. This significant escalation occurred during the weekend when most global markets were closed, placing crypto traders at the forefront of responding to these geopolitical tensions.
As the situation intensified, traditional safe-haven assets like bonds and the dollar saw an uptick on Friday, reflecting the market's nerve. Meanwhile, data from Coinglass revealed that around $1.5 billion in bullish crypto bets were wiped out in just two days, marking one of the largest liquidations in months. "The leverage had overwhelmed the market recently, leading to a substantial price drop in digital assets," explained Zaheer Ebtikar, founder of crypto fund Split Capital.
Stock markets in the Middle East also felt the strain, with Israeli stocks fluctuating and closing slightly lower by Sunday morning in London.
The ongoing conflict between Israel and Iran puts to the test the idea that cryptocurrencies can serve as a safe haven during geopolitical unrest—an idea popular among crypto enthusiasts. This theory was previously challenged during Russia's invasion of Ukraine in early 2022, which coincided with a prolonged downturn in the crypto market.
Despite peaking at a record high of $73,798 in mid-March, Bitcoin's price has retreated. The initial surge was partly fueled by the enthusiasm around new U.S. exchange-traded funds (ETFs) for cryptocurrencies, but interest in these products has cooled recently.
Looking ahead, the crypto community is anticipating the upcoming Bitcoin halving in late April, which will cut the production of new Bitcoin tokens in half. This event has historically driven up prices, although the impact may be muted this time around, considering the recent peak prices.