The global crypto market exhibited a disturbing crash in the last 24 hours. On-chain data shows that the total market valuation declined by 4.36% to $2.16 trillion at the time of writing. This is a stack difference from yesterday’s data of $2.26 trillion. Thus, the market lost about $100 billion in one day.
The flagship cryptocurrency, Bitcoin, traded as high as $64k yesterday before crashing 3.60% to its current price of above $61k. The altcoin market mirrored this movement as most of the top tokens in this category have lost considerably since yesterday. With this new development, market participants wonder why the crypto market crashed today. Here is why.
Geo-Political Tension in the Middle East
It is no news that the crypto market often reacts to tension between countries. The geopolitical tension between Iran and Israel contributed heavily to the decline in the financial market, particularly cryptocurrency.
On October 1, Iran launched a missile strike on Israel. Following this, the price of Bitcoin lost $4,000 after it fell from its intraday trading of $64,070 to $60,371.
However, at the time of writing, the largest cryptocurrency by market cap recovered and is now changing hands at $61,665, still down by 3.57%.
Source: CoinMarketCap Market Sentiment Declines
The market sentiment switched notably from ‘fear’ to ‘greed’ last week. However, at the beginning of this week, investors’ confidence began to wane, shifting it from ‘greed’ to neutral.’ At the time of writing, this metric has slipped back to ‘fear’ according to the crypto fear and greed index data presented by Alternative.
Bitcoin was rocked with panic selling amid the Iran and Israel saga as investors hurriedly dispose of their holdings. This would not be the first time such a scenario has played out. Recall that in mid-April, Bitcoin tanked over 13% following a similar drone strike by Iran on Israel.
However, other commodities such as gold and oil are maintaining an upward trajectory today. Several experts have commented on the situation on X. Particularly, Jeroen Blokland, the founder of Blokland Smart Multi-Asset Fund, noted how investors are selling Bitcoin to buy Gold as the geopolitical tension increases.
Source: Jeroen Blokland/X
Commenting on this, Bitcoin proponent Samson Mow, faulted the rationale behind this action. He pointed out that selling Bitcoin to buy paper gold makes no sense because paper gold “cannot be moved anywhere in the event of actual war.”
Imagine trying to hedge against war by selling #Bitcoin to buy paper gold that you can’t move anywhere in the event of actual war. https://t.co/KX6WDaBJiM
— Samson Mow (@Excellion) October 2, 2024
The price decline is not isolated to Bitcoin. Ethereum, the second-largest cryptocurrency by market cap saw a notable 6.06% dip in price to change hands at $2,488. Other altcoins like BNB, Solana (SOL), and XRP all lost between 4.1% and 5.18% in the last 24 hours.
The broader crypto market as observed through the crypto heat map showcases a pool of red trading. At this time, it is unknown how long the decline will continue, however, it is important to note that this is the same old story of the market reacting to global tension which will eventually pass.
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