The conflict between Israel and Iran has been significantly impacting the global financial markets, including cryptocurrencies. Below are the main effects:
* Increased market volatility:
* Risk aversion: Geopolitical conflicts often lead investors to shift away from risk assets (like stocks, cryptocurrencies) to safer assets (like gold, government bonds, USD). This exerts downward pressure on Bitcoin and altcoins.
* Price volatility surges: The Bitcoin volatility index has risen to its highest level in months. This presents challenges for futures traders, regardless of whether they are buying or selling.
* Liquidations: Significant volatility leads to large liquidations of both long and short positions in the cryptocurrency market, causing losses for many traders.
* Bitcoin and cryptocurrencies may not be an absolutely safe haven asset:
* Initially, Bitcoin was widely expected to become a "digital gold" or a safe-haven asset amid economic and geopolitical instability. However, recent developments show that Bitcoin remains heavily influenced by geopolitical tensions and actions taken by central banks (e.g., Fed interest rate decisions).
* While gold is rising sharply amid conflict, Bitcoin is trending down, indicating that it is still seen as a more risky speculative asset rather than a safe-haven store of value like gold.
* Impact on altcoins:
* When Bitcoin is under pressure, altcoins often follow suit and decrease in value. On-chain data indicates prolonged selling pressure across the altcoin market.
* Major cryptocurrencies like Ethereum (ETH), XRP, Solana (SOL), Cardano (ADA), and meme coins like Dogecoin (DOGE) have all recorded declines.
* Indirect impacts from macroeconomic factors:
* Oil prices and inflation: The conflict in the Middle East could affect global oil supply, driving prices higher. This raises concerns about inflation, forcing central banks (like the U.S. Federal Reserve - Fed) to consider more "hawkish" monetary policies (i.e., raising interest rates), putting negative pressure on risk assets like cryptocurrencies.
* Fed interest rate decisions: Investors are closely monitoring the Fed Chair's stance on interest rates. Any signs that the Fed may maintain higher rates for longer could pressure the cryptocurrency market.
* Cyberattacks:
* The Israel-Iran conflict has also erupted in cyberspace, with DDoS attacks targeting banks and cryptocurrency exchanges. This raises cybersecurity risks and could harm businesses in the cryptocurrency sector.
In summary:
The Israel-Iran conflict creates an unstable environment, fostering risk aversion and increasing volatility in the cryptocurrency market. Although Bitcoin is sometimes seen as a safe-haven asset, in this context, it is still under significant downward pressure alongside other risk assets. The degree of impact also depends on whether the conflict escalates further and whether powers like the U.S. intervene directly.