Cryptocurrency prices took a hit on Friday as tensions escalated in the Middle East, triggering panic selling across financial markets. Bitcoin dropped 5% in 24 hours to fall under $67,000, while Ether decreased by 9% to around $3,200. The US pledged to defend Israel if Iran attacks, leading to fears of potential conflict between the US and Iran. The S&P 500 also experienced a drop of 1.4%, and safe havens like the US dollar and Gold saw an uptick in prices as investors sought refuge in these assets.
Despite the mild sell-off in Bitcoin, many major altcoins suffered more significant losses on Friday. Altcoins such as Solana, XRP, Dogecoin, Toncoin, Cardano, and Avalanche dropped between 10-16% in 24 hours. Dogwifhat, Bonk, and Arbitrum were among the worst-performing altcoins in the top 100 by market capitalization. Open interest in altcoins was slashed by 30%, resulting in losses of approximately $6 billion in open interest. Leveraged long crypto futures positions worth $770 million were wiped out on Friday, with many altcoins down by at least 25% from recent highs.
The recent turbulence in cryptocurrency prices comes amidst a period of profit-taking and derisking in the market. Following a strong start to 2024, where major altcoins posted significant gains and Bitcoin reached new record highs, momentum has stalled. Factors such as uncertainty around a Bitcoin halving, fading Fed rate cut bets, and geopolitical tensions have contributed to the profit-taking in the market. While the pullback in altcoins presents buying opportunities at lower prices, investors should be prepared for increased volatility in the near term.
It is still too early to predict whether the latest drop in cryptocurrency prices is over, especially with ongoing tensions between Iran and Israel. While the altcoin pullback offers an opportunity for investors, they should be ready for significant fluctuations. Bitcoin, which has shown resilience in recent weeks, remains within recent ranges and is viewed by many as a safe haven asset similar to gold. Despite dropping 5% in 24 hours, Bitcoin is only down 8% from its record highs and could experience a strong rebound later this year.
The macroeconomic environment, characterized by significant deficit spending and central bank easing, is likely to support Bitcoin’s price in the long term. Institutional demand for spot Bitcoin ETFs has also added buy pressure to the market. While the near-term outlook for altcoins may be uncertain, traders should be prepared for potential comebacks later in the year. Despite the high-risk nature of the cryptocurrency market, the potential for Bitcoin to reach $100,000 later this year remains a possibility, suggesting a positive outlook for the digital asset space. Investors should exercise caution and conduct thorough research before investing in cryptocurrencies.
