On Tuesday, Bitcoin (BTC) dipped below the crucial $63,000 level, mirroring a broader decline in the cryptocurrency market that has lost nearly $200 billion in total market capitalization over the weekend.
This decline comes after Bitcoin reached a recent two-month high of $66,500 just last Friday, which had fueled optimistic sentiment among investors looking ahead to the final quarter of the year. However, a series of geopolitical events, notably escalating tensions in the Middle East, could challenge the stability of risk assets like Bitcoin.
Bitcoin Faces Pressure As Traders Shift to Gold
Market analyst Jeroen Blokland, founder of the Blokland Smart Multi-Asset Fund, observed that global investors are increasingly liquidating Bitcoin to acquire gold, a trend evidenced in the BTG chart below, seen as a key reason for Bitcoin’s recent price dip.
Blokland links the cryptocurrency’s difficulties to rising tensions between Iran and Israel, which have escalated over the past month. This situation has heightened worries about investor sentiment, as gold is traditionally viewed as a stable asset that can buffer against fluctuations in the digital currency market.
The situation further intensified on Tuesday when missiles were reportedly launched from Iran toward Israel, prompting urgent alerts from the White House. Officials indicated that Iran was gearing up for a potential ballistic missile strike on Israel, escalating fears of a wider regional conflict.
The White House has declared that it is actively aiding defensive measures for Israel and warned of severe repercussions for Iran if a military offensive were to occur.
Historically, Bitcoin has been dubbed “digital gold,” but with continuing economic uncertainties paired with geopolitical strife, fears of a global recession remain heightened. This unpredictability could drive investors to seek safer assets, adding to Bitcoin’s downward trend.
Analysts Caution Against Overbought Trends
Analysts have also expressed concerns regarding Bitcoin’s overbought status after nearly a 5% rise during the week leading up to September 27. This increase coincided with a substantial rise in net inflows into global crypto exchange-traded products (ETPs), reaching their highest levels since mid-July.
Last week, the total net buying volume of US Bitcoin exchange-traded funds (ETFs) totaled 16,774 BTC, exceeding the typical monthly supply of newly mined Bitcoin, which is around 13,500 BTC.
However, this upward sentiment faced a reality check on Monday when Federal Reserve (Fed) Chair Jerome Powell issued a warning to investors during midday trading.
According to CNBC, Powell stated that the central bank is not on a predetermined path, while further rate cuts loom. This remark generated a cautious atmosphere among investors, likely contributing to the recent retracement in the market’s leading cryptocurrency.
At the time of this report, BTC is trading at $62,130, down more than 2% in the past 24 hours.
Featured image from DALL-E, chart from TradingView.com
