Bitcoin Plummets 4% as US-Iran Tensions Spark Crypto Market Crash

In the past 24 hours, the cryptocurrency market experienced a significant downturn as Bitcoin's price plummeted over 4%, falling below $100,000 for the first time in weeks. This dramatic decline was triggered by the announcement from US President Donald Trump of a bombing operation on three nuclear sites in Iran, which he described as a "successful" mission that left the facilities "obliterated."

In response to the attack, Iran issued a fresh threat to close the Strait of Hormuz, a critical route for global oil shipments. This escalation in geopolitical tension sent shockwaves through global markets, including the cryptocurrency market, leading to a wave of panic selling and liquidations. Over $1.02 billion worth of positions were liquidated across the crypto market, with Bitcoin leading the decline. Popular altcoins such as Ethereum and Solana also broke key support levels, indicating potential further drops ahead.

Market analysts noted that Bitcoin is currently testing a support zone between $100,000 and $102,000. If it manages to hold above this range, there could be a temporary bounce or sideways movement. However, if Bitcoin falls below this support, the next potential support lies around $96,000 to $97,000. At the time of writing, BTC has dropped below that support. There is also weakening momentum in the larger timeframes, with several technical indicators hinting at a possible longer correction phase or extended sideways consolidation for Bitcoin in the coming weeks or months.

While minor short-term recoveries could occur, analysts predict that strong bullish moves are unlikely in the immediate future due to both technical weakness and ongoing geopolitical risks. The impact of the US airstrikes on Iran's nuclear sites was immediate and profound, catching crypto bulls off guard and leading to a sharp selloff. This resulted in the liquidation of positions worth $595 million. The market-wide crash affected not only Bitcoin but also other major cryptocurrencies, with Ethereum and other altcoins experiencing even sharper declines. The fear of war and its potential economic repercussions caused a significant loss in market value, with the crypto market shedding $240 billion in a short span.

Historical data suggests that such declines are often short-lived and followed by a rebound. However, the extreme bearish sentiment from retail investors hinted at a potential recovery in the near future. The conflict in the Middle East had a notable impact on the trading volume of perpetual swap contracts and funding rates, which turned negative for several tracked tokens. Market-wide de-risking due to fears of an escalating Iran-Israel conflict resulted in a sea of red for crypto assets over the past week. Bitcoin's price dropped by more than 4%, Ethereum by over 8%, and Solana by 10%. Despite the bearish sentiment, ETH options markets showed a less bearish tilt toward out-of-the-money puts relative to BTC short-tenor options. For expirations beyond 30 days, the ETH put-call skew remained positive, indicating a more optimistic outlook compared to Bitcoin.

The funding rates for most tracked crypto tokens turned negative following reports of the conflict, signaling a clear shift in market sentiment. While funding for Ethereum, Solana, XRP, and Dogecoin turned negative, Bitcoin held up relatively better, registering only one negative funding rate as the conflict began. Over the past week, funding rates for the majority of tokens fluctuated between positive and negative values but remained lower than levels seen at the end of May to the first week of June. The overall market sentiment was bearish, with short-tenor volatility smiles skewed toward out-of-the-money puts and volume and open interest dominated by puts. This bearish picture was further supported by the fact that open interest in BTC options was also dominated by puts, with recent put volumes far exceeding those of calls.