On Tuesday, Bitcoin (BTC) fell below the critical $63,000 threshold, reflecting a broader decline in the cryptocurrency market, which has shed nearly $200 billion in total market capitalization over the weekend.
This drop follows Bitcoin’s recent two-month peak of $66,500, achieved just last Friday, which had ignited bullish sentiment among investors looking forward to the last quarter of the year. However, a series of geopolitical developments, particularly rising tensions in the Middle East, may test the resilience of risk assets like Bitcoin.
Bitcoin Under Pressure As Investors Sell Into Gold
Market expert Jeroen Blokland, founder of the Blokland Smart Multi-Asset Fund, noted that global investors are increasingly selling Bitcoin to purchase gold, a trend evident in the BTG chart below, considered a significant factor contributing to Bitcoin’s recent price correction.
Blokland connects the cryptocurrency’s struggles to escalating tensions between Iran and Israel, which have intensified over the past month. The situation has raised concerns about investor confidence, as gold is a historically stable asset that can hedge against volatility in the digital currency market.
The situation escalated further on Tuesday when missiles were reportedly launched from Iran toward Israel, prompting urgent warnings from the White House. Officials indicated that Iran was preparing for a potential ballistic missile attack on Israel, heightening fears of a broader conflict in the region.
The White House has stated that it is actively supporting defensive preparations for Israel and warned of severe consequences for Iran should a military attack occur.
Historically, Bitcoin has been referred to as “digital gold,” but with ongoing economic uncertainties coupled with geopolitical unrest, fears of a global recession loom large. This volatility may prompt investors to seek refuge in more stable assets, contributing to Bitcoin’s downward pressure.
Analysts Warn Of Overbought Conditions
Analysts have also raised concerns about Bitcoin’s overbought conditions following the nearly 5% climb in the week leading up to September 27. This surge coincided with a significant increase in net inflows into global crypto exchange-traded products (ETPs), reaching their highest levels since mid-July.
Last week, the combined net buying volume of US Bitcoin exchange-traded funds (ETFs) amounted to 16,774 BTC, surpassing the typical one-month supply of newly mined Bitcoin, which stands at about 13,500 BTC.
However, this bullish sentiment faced a reality check on Monday when Federal Reserve (Fed) Chair Jerome Powell cautioned investors during mid-afternoon trading.
According to CNBC, Powell indicated that the central bank is not following a predetermined path while further rate cuts are on the horizon. This statement led to a cautious mood among investors, perhaps contributing to the recent pullback in the market’s largest cryptocurrency.
At the time of writing, BTC is trading at $62,130, down over 2% in the last 24 hours.
Featured image from DALL-E, chart from TradingView.com
Source: https://bitcoinist.com/bitcoin-drops-below-63000-are-geopolitical-issues/