Why Did BTC Crash Amid the Attack on Israel? What Comes Next?

On the day of these developments, over $950 million in trading positions were liquidated, causing BTC's price to fall from $67,000 to nearly $61,000. This set off a cascade of losses across many altcoins, some of which plummeted by over 20%. 

The crisis appeared to be waning when U.S. President Joe Biden urged Israel to show restraint, and Iran indicated it had completed its “mission.” However, the situation took another turn after Israel's Defense Minister Yoav Galant stated that Israel had no alternative but to respond to Iran’s unprecedented missile attack. Consequently, BTC swiftly fell again, dropping below $63,000.

The events disproved the hypothesis that Bitcoin could act as a safe-haven asset during global crises. This theory, based on Bitcoin offering security when traditional financial systems and assets face threats, did not hold up as investors began to withdraw, moving their funds to other assets or even cash. The rapid shifts underline the perception that cryptocurrencies are still regarded as high-risk investments.

What May Come Next? ?

Taking a nuanced and in-depth look beyond superficial factors reveals both positive and negative dynamics at play. On the positive side, the recent BTC drop wasn’t triggered by any internal disruptions within the crypto industry itself, which suggests a potential for market recovery. However, there's a downside: this incident may prompt regulators to tighten their grip on cryptocurrencies due to their volatility and the substantial losses incurred by investors, which fuel speculative fervor. Additionally, cryptocurrencies still face persistent allegations of being used in financing terrorism. 

For example, the U.S. Treasury Department has recently been pushing to expand its authority to impose sanctions on cryptocurrency exchanges and digital asset providers engaged in transactions linked to illegal activities. The Deputy Secretary of the Treasury pointed out that certain hostile nations are increasingly using digital assets to illicitly transfer resources.

Upcoming Key Events ?

On April 15, investment firms Hashkey Capital, Bosera Asset Management, and China Asset Management received approval to launch spot Bitcoin and Ethereum ETFs in Hong Kong. While this development is positive, it remains to be seen how strong the demand for these ETFs will be. According to Eric Balchunas, a senior ETF analyst at Bloomberg, these funds will unlikely attract billion-dollar inflows.

Moreover, an event worth noting is the upcoming Bitcoin halving on April 20, which happens only once every four years and has historically been associated with each bull market cycle. Another significant date is May 1, when the U.S. Federal Reserve is set to announce its decision on interest rates, a crucial determinant of market liquidity across the board, including in the cryptocurrency market. Although there are currently no indications of a rate cut, the potential for unexpected decisions remains. 

Clearly, the period of market turbulence is far from over. The situation remains fluid, and while cryptocurrencies are still facing pressures, they also maintain a robust platform that could help preserve their current equilibrium.  

This article is for informational purposes only and not intended as financial advice. Always remember to DYOR before making investment decisions.