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The price of bitcoin fell sharply to $60,164 on Tuesday following rising geopolitical tensions in the Middle East, with Iran launching missile attacks against Israel. The rally shook global markets and affected both traditional assets and crypto assets. bitcoin was not immune with a notable -4% drop.
Market participants, who had anticipated a strong bullish trend for the so-called “Uptober” month, were forced to re-evaluate as overall market sentiment turned risk averse. However, the reaction to geopolitical news may be exaggerated, according to several analysts.
Will bitcoin fall further?
Macro strategist Alex Krüger (@krugermacro) warns about the sudden change in market sentiment. Through x, he x.com/krugermacro/status/1841398125375750387″ target=”_blank” rel=”nofollow”>writes“It's been strange watching everyone be completely elated and ask for 'Uptober.' From pessimism to pessimism, in the blink of an eye (…) Despite the conflict in the Middle East, this is an election year in the United States. “Great uncertainty awaits us.”
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Krüger highlights the volatility often seen in financial markets during US election years, noting: “In election years, the month of October is consequently the most volatile and stocks historically show slightly negative returns.” He also added that speculative markets tend to react to uncertainties and, given the proximity of the election and upcoming payroll data on Friday, greater volatility can be expected.
“Of course, if payrolls go up a lot next Friday, stocks would plummet, since we're in a 'good news is good news' regime. But the time to push and maintain is after the elections, possibly from the very night of the elections,” says Krüger.
Featured crypto Analyst CRG (@MacroCRG) x.com/MacroCRG/status/1841389177012617630″ target=”_blank” rel=”nofollow”>grades the potential for bitcoin price to recover despite temporary market turbulence. “That could be the quarterly minimum for children. Markets love to make highs and lows at the beginning of the candle. Furthermore, geopolitical movements have a high tendency to fade. We may still see some turbulence depending on Israel's response, but the market is likely anticipating this.”
Like Krüger, he notes that increased liquidity in the market could provide support for bitcoin, stating: “Liquidity will start to increase from now on, which btc should detect immediately.” Overall, CRG remains optimistic about bitcoin's long-term trajectory, stating that despite near-term uncertainties, “$100,000 of btc is coming.”
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Singapore-based trading firm QCP Capital also offers its perspective on the impact of the conflict. In your last investor notewrites the firm: “The Israeli-Iranian conflict has escalated, with more than 180 missiles launched by Iran. Despite this, the reaction in traditional financial markets has been relatively muted. The S&P closed just 1% lower, while crude oil (WTI) rose 2%.”
However, the cryptocurrency market saw a steeper decline and bitcoin faced greater selling pressure. “btc closed 4% lower, with support remaining around the $60,000 level. A further escalation of the conflict could take btc to the $55,000 mark,” notes QCP.
Despite the immediate impact, QCP Capital's report also highlights that the broader economic context remains favorable for risk assets in the medium term. “Middle East geopolitics will take center stage for now, but the shallow sell-off suggests the market continues to have good bids for risk assets. “This small setback should not distract us from the bigger picture.”
They also point to global monetary policies as an important factor. “The People's Bank of China liquidity surge and potential fiscal support will likely support asset prices in China, and the bullish sentiment could spread globally to support risk assets, including cryptocurrencies. (…) Asset prices are expected to remain supported going into 2025, as both the world's largest central bank (the Federal Reserve) and third largest (the People's Bank of China) have begun their policy cycles. serious cuts,” concludes QCP.
At the time of publication, btc was trading at $61,286.
Featured image created with DALL.E, chart from TradingView.com
