Bitcoin Drops 3% as US-Iran Tensions Spark Market Sell-Off

Bitcoin's price experienced a significant downturn in the past 24 hours, plummeting to a multi-week low following the US's attacks on multiple Iranian nuclear sites. This event triggered a broader market sell-off, with altcoins posting even more notable price declines, leading to a surge in Bitcoin's dominance.

The business week started on a positive note as Bitcoin's price surged from under $105,000 to $109,000 by Tuesday. However, the cryptocurrency faced immediate rejection, pushing it down to $103,500 within hours. Despite a brief recovery, the overall negative market sentiment persisted, and Bitcoin continued to lose value in the following days. The situation worsened as the US launched "successful" attacks against multiple nuclear sites in Iran, with the President warning of further strikes if Iran retaliated. This led to Bitcoin's price tumbling below $101,000 for the first time in nearly three weeks, although it has since recovered to $102,500.

Bitcoin's market capitalization has decreased to $2.040 trillion, but its dominance over altcoins has skyrocketed to almost 63% as most altcoins experienced significant losses. Ethereum, the largest altcoin, has dumped by over 7% in the past 24 hours and is close to breaking below $2,200, down from $2,800 just a week ago. Other major altcoins such as Solana, Dogecoin, Cardano, and LINK are also deep in the red. Smaller altcoins like VIRTUAL, APT, INJ, TIA, TAO, SEI, JUP, FET, and PEPE have seen even more painful declines, with double-digit losses on a daily scale. These developments support a recent report claiming that hopes for an altseason are based on "wishful thinking" rather than hard data.

Bitcoin's dominance has surged to 64.4%, solidifying its leadership in the cryptocurrency market. This dominance has been accompanied by a slight decline in Ethereum's market share, which dropped to 9%. The price of Bitcoin lost nearly 3% on the day, while major altcoins such as Ethereum, Solana, and Cardano saw even more significant declines. This shift in market dynamics has led to a noticeable decline in altcoin performance, with Ethereum (ETH/BTC) dropping by 2.1%. The significant sell-off in the market was largely driven by Ethereum long positions, which accounted for a substantial portion of the losses. Traders have identified that Bitcoin's market dominance typically declines below 55% during an altcoin season, a trend that was not observed in this instance. The decline in altcoin performance has been attributed to Bitcoin's strength, which has led to a shift in market dynamics. Institutional interest in Ethereum has also spiked alongside Bitcoin's, thanks to the proliferation of spot crypto ETFs. This trend has been observed in the United States, where spot Ethereum funds have seen significant growth. The on-chain network activity of Bitcoin has experienced a notable slowdown, with a sharp drop in daily transaction counts. This trend contrasts with Bitcoin’s bullish momentum, which earlier saw it cross the $111,000 mark last month. The decline in transaction count is accompanied by a sharp increase in average transaction size, indicating growing whale dominance on-chain. Large holders, including institutions and high-net-worth individuals, are increasingly utilizing the Bitcoin base layer for significant value transfers. The average volume per transaction sits at $36,200, with transactions exceeding $100,000 now accounting for 89% of total volume. Smaller transfers under $100,000 have shrunk to just 11% of total volume. As on-chain usage declines, trading activity has increasingly migrated to off-chain venues, particularly centralized exchanges. The futures market alone averaged $57 billion in daily volume over the past year, peaking at $122 billion. In contrast, spot trading volumes remain considerably lower, averaging $10 billion per day with a peak at $23 billion. Collectively, off-chain activity now exceeds on-chain volume by a factor of seven to sixteen. The introduction of spot Bitcoin ETFs in the United States in early 2024 has likely contributed to this trend. Leverage across derivatives markets has expanded, with total open interest in Bitcoin futures and options reaching $96 billion, a nearly nine-fold increase from 2020 levels. Stablecoins have increasingly replaced crypto assets as collateral, particularly following the collapse of FTX. This trend is viewed as an evolution toward a more mature risk-managed structure in crypto finance.