Crypto Market Plunges 6.1% Amid Israeli Iran Tensions

Cryptocurrencies experienced a significant downturn as Israeli airstrikes on Iran's nuclear and missile sites sent shockwaves through global markets. The CoinDesk 20 Index (CD20), a broad measure of the crypto market, declined by 6.1% over 24 hours, while bitcoin (BTC), often seen as a safe-haven asset, dropped by 2.9%. In contrast, gold futures, a traditional safe-haven, rose by 1.3% from their close.

Israeli Prime Minister Benjamin Netanyahu stated that the overnight attack, which also targeted Iran's top military leaders, aimed to curb Iran’s nuclear program and missile capabilities. Iran responded by launching 100 suicide drones toward Israeli territory, with a more substantial reaction anticipated. The strike occurred less than 24 hours after the International Atomic Energy Agency reported that Iran was not adhering to uranium enrichment limits. The U.S. confirmed it was not involved in the attack, which resulted in the deaths of some of Iran’s military leaders.

The escalation led to a plunge in risk assets across the board. Japan’s Nikkei dropped around 0.9%, U.S. index futures fell 1.2%, and the Euro Stoxx 50 lost 1.35%. U.S. crude oil futures rose more than 6% to $73, with Brent crude spiking 14% at one point. Gold surged to $3,445 per ounce, approaching its all-time high.

Cryptocurrencies' declines erased gains made earlier in the week, fueled by speculation around ETF approvals. Solana's SOL, in particular, had rallied on reports that the SEC asked ETF issuers to update their S-1 filings, potentially accelerating the launch timeline. SOL is down nearly 9.5% in the last 24 hours. Jake Ostrovskis, an OTC trader at Wintermute, noted that the market is now relatively underexposed to SOL and related assets, making the current setup particularly interesting to watch.

Despite the optimism and growing inflows into spot crypto ETFs, with BTC funds bringing in $939 million month-to-date and ETH seeing $811 million in net inflows, investors are now focused on the Middle East. Polymarket traders are weighing a 91% chance that Iran will retaliate against Israel this month, while the perceived odds of U.S. military action against Iran jumped from a mere 4% to 28%.

Ether continues to face resistance at the daily order block, with the price dropping below Monday’s high as tensions ramp up in the Middle East. Earlier today, it briefly traded below Monday’s low before reclaiming that level. A daily close above Monday’s low of $2480 — aligned with the 200-day exponential moving average, which has served as key support since May — would be an encouraging sign of strength.

In the past 24 hours, 248,759 traders were liquidated, with total liquidations coming in at $1.16 billion. The seven-day skew fell to its lowest since April, indicating increased demand for put options over calls after Israel's attack. Bitcoin's price fell to its 50-day simple moving average (SMA) at $103,150.

While the market remains volatile, the focus is now on the geopolitical tensions and their potential impact on global markets. The escalation in the Middle East has led to a flight to safety, with traditional safe-haven assets like gold and oil seeing significant gains. The crypto market, while experiencing a downturn, continues to be influenced by broader market sentiment and geopolitical events.