The conflict between 🇮🇱Israel, 🇺🇸United States, and 🇮🇷Iran affects the cryptocurrency market mainly through uncertainty and risk aversion. Here’s a simple explanation:
Price drop 📈 When there is geopolitical tension, investors tend to seek "safe havens" for their money, which often means selling more volatile assets like cryptocurrencies. This can lead to declines in the price of Bitcoin and other cryptocurrencies. For example, the recent U.S. bombings of nuclear sites in Iran caused a drop in Bitcoin to $BTC below USD 100,000.
Increase in volatility 💢 International conflicts generate uncertainty about the global economy. This uncertainty translates into sharper and more frequent price movements in the crypto market, which is very sensitive to geopolitical news.
Search for alternatives (sometimes) 🔍 Although cryptocurrencies may initially fall, in some cases they can also be seen as an alternative to traditional financial systems, especially in countries with high inflation or capital controls. However, in a large-scale conflict involving powers like the U.S. and Iran, the overall risk sentiment tends to dominate.
Higher trading volume 📊 Interestingly, even when prices fall, trading volume may increase, indicating the great anxiety of the market and the buying-selling activity of investors trying to react to the situation.
In summary, geopolitical conflicts, like the tension between Israel, the U.S., and Iran, generate nervousness and a feeling of "risk aversion" in financial markets, and the cryptocurrency market, due to its volatile nature, quickly reflects this with price drops and an increase in uncertainty.
