By Bitcoin and other cryptocurrencies experienced a decline as token traders expressed concern over the potential impact of escalating violence in the Middle East on the market. While the stock market seems to be looking past this issue, digital assets have taken a hit.
In the past 24 hours, the price of Bitcoin has retreated 2% and currently stands at around $27,150. Despite settling above its recent trough near $27,000, which marked its lowest level this month, Bitcoin appears vulnerable and might fall back into the $26,000 zone. This zone had been dominant in trading for weeks until a rally at the end of September.
According to Alex Kuptsikevich, an analyst at broker FxPro, this decline marks the fifth consecutive day of losses. The failed attempt to consolidate above the 200-day moving average last week has paved the way for potential further drops. Kuptsikevich believes that if Bitcoin consolidates below $27,000, it will likely intensify the selloff and lead to a quick drop to $26,000 (previous local highs) and possibly even further to $25,000.
Interestingly, cryptocurrencies are seemingly decoupling from the stock market, as the Dow Jones Industrial Average and S&P 500 are on track for their fourth straight session of gains while Bitcoin faces its fifth day of losses. While tokens and stocks are not always correlated, they have recently been trading in tandem due to shifting expectations regarding future interest rates. These expectations have an impact on both cryptocurrencies and equities.
Phillip Shoemaker, a blockchain investor and executive director of Identity.com, a crypto-focused identity verification group, believes that many investors are anticipating a significant pullback for Bitcoin due to escalating geopolitical tensions globally. The concerns mainly revolve around a potential surge in oil prices resulting from the events unfolding in the Middle East. Such a surge could have a knock-on effect on various assets, especially those further along the risk curve.
In summary, Bitcoin and other cryptocurrencies are facing uncertainty as escalating geopolitical tensions in the Middle East loom over the market. While the stock market remains largely unaffected, digital assets are enduring losses. Traders are preparing for potential further declines as they monitor the situation closely.
The Impact of Israel’s Conflict with Hamas on the Stock Market
Investors in the stock market are seemingly shrugging off Israel’s declaration of war on Hamas, despite the recent surge in violence from Gaza. This conflict has even drawn the attention of the U.S. military, further escalating tensions in the Eastern Mediterranean region. However, the implications of this situation may have broader consequences for the crude oil market, potentially affecting a deal between Israel and Saudi Arabia. As a major energy player, Saudi Arabia’s involvement could have supported a decline in oil prices.
Recent months have seen a notable increase in the price of crude oil, which in turn has reignited concerns about inflationary pressures. Investors are worried that this could lead to prolonged higher interest rates set by the Federal Reserve. Such a scenario tends to have a negative impact on risk-sensitive assets like stocks and cryptocurrencies. When risk-free cash or government debt offers higher returns, investors lose their incentive to take on riskier investments such as Bitcoin. Moreover, expectations of rising interest rates or government bond yields often exacerbate the selling pressure on riskier assets like tokens or tech stocks, resulting in their decline before other markets.
If traders are indeed selling Bitcoin out of fear regarding the implications of the Middle East conflict on risk assets, it doesn’t bode well for stocks. Although not a foolproof indicator, cryptocurrencies, particularly Bitcoin, have historically served as leading indicators of risk sentiment in broader markets. Their decline often precedes or foreshadows downturns seen later in stock markets.
Beyond Bitcoin, Ether, the second-largest cryptocurrency, experienced a 1% drop in value, settling at $1,570. Smaller tokens known as altcoins faced even more significant weakness, with Cardano and Polygon slipping by 2%. Memecoins, on the other hand, displayed mixed performance, with Dogecoin gaining less than 1% and Shiba Inu shedding 1%.
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