Cryptocurrencies Plunge 5% to 7% as Geopolitical Tensions Rise

Cryptocurrencies experienced a significant selloff late on Thursday, with the downturn accelerating in the early U.S. evening hours. Bitcoin, which had been trading above $108,000 earlier in the day, plummeted below $106,000. This decline was part of a broader market selloff that affected various altcoins, including ether, solana, XRP, and dogecoin, which saw drops ranging from 5% to 7%.

The selloff in cryptocurrencies occurred despite other risk assets, such as U.S. stocks, remaining relatively unaffected by troubling macro headlines. President Trump's threats of renewed tariff measures and escalating tensions in the Middle East, particularly concerning nuclear negotiations with Iran and potential Israeli strikes, failed to shake U.S. stocks, which closed with modest gains. However, cryptocurrencies were not as resilient, experiencing a deeper selloff.

Trump's warnings about potential conflicts in the Middle East added to the geopolitical uncertainty. He advised American citizens in the region to leave, citing the possibility of imminent military action. Despite these warnings, U.S. stocks managed to maintain their stability, while cryptocurrencies faced a more pronounced selloff.

The recent rally in risk assets, including cryptocurrencies, has occurred against the backdrop of a Federal Reserve that appears reluctant to ease monetary policy. However, there are growing signs that weak economic data may soon force the Fed's hand. The Producer Price Index for May came in softer than forecast, both on the headline and core levels, and initial jobless claims unexpectedly matched last week's multi-month high of 248,000. Continuing jobless claims also rose to 1.956 million, the highest level since November 2021.

President Trump has continued to pressure Fed Chair Jerome Powell to adopt a more dovish stance, even threatening to force action if necessary. Powell's term as Fed chair does not end until 2026, and Trump had previously stated that firing him before then was not an option. The ongoing tension between the White House and the Federal Reserve adds another layer of uncertainty to the economic landscape, which may have contributed to the selloff in cryptocurrencies.

In summary, the late-day selloff in cryptocurrencies, with Bitcoin slipping below $106,000, was driven by a combination of geopolitical tensions and economic uncertainty. Despite other risk assets remaining stable, cryptocurrencies faced a deeper selloff, highlighting their sensitivity to macroeconomic headlines and geopolitical risks. The ongoing pressure from the White House on the Federal Reserve to ease monetary policy adds another layer of uncertainty to the market, which may continue to impact cryptocurrency prices in the coming days.