Crypto markets started the US trading session with a sharp decline tonight as escalating tensions in the Middle East caused investors to retreat from risk assets.
Bitcoin (BTC), the largest digital asset by market capitalization, rose to around $64,000 during European trading hours before quickly falling to $62,500 as Axios reported that the White House had information that Iran was preparing a ballistic missile attack on Israel. At the time of writing, Bitcoin was down about 2.62% over the past 24 hours to $62,144.
“The United States has detected indications that Iran is preparing to launch ballistic missiles against Israel,” an unnamed White House official told multiple media outlets on October 1. “We are actively supporting defensive measures to protect Israel from this attack. This action would have serious consequences for Iran.”
Rear Admiral Daniel Hagari, spokesman for the Israel Defense Forces (IDF), later said that the US had informed Iran of its intention to attack with ballistic missiles. However, the IDF had not detected any threat from the air from Iran.
Hagari called on Israelis to follow military instructions, asserting that the IDF was ready for both defense and attack. “Iran will suffer the consequences if it attacks Israel,” Hagari warned.
Tensions between Iran and Israel have been rising in recent months following a series of events, most recently the IDF killing of Hezbollah leader Hassan Nasrallah, a close ally of Tehran and a senior commander of the Islamic Revolutionary Guard Corps. Iran said Nasrallah’s death would lead to the “destruction” of Israel, but insisted it would not send troops to Lebanon.
Most major altcoins saw similar declines over the same period, with Ether (ETH) and Solana (SOL) performing slightly better than average, while Polkadot (DOT), Uniswap (UNI), Polygon (POL), and Hedera (HBAR) performed slightly worse, down between 8% and 10% each.
Major U.S. stock indexes opened lower, with the S&P 500 and tech-heavy Nasdaq down 1.2% and 2%, respectively, in early trading. Gold rose 1.2% to $2,690 an ounce and was near a record high just above $2,700 set last week, while WTI crude rose 3% to $70 a barrel.
The divergence in gold and Bitcoin prices has highlighted the leading digital asset’s high correlation with risk assets like stocks, while gold retains its traditional role as a safe haven. According to a report by K33 Research on Tuesday, the 30-day rolling correlation coefficient between BTC and the S&P 500 is now approaching its yearly high of 0.62.
Bitcoin’s Tuesday price drop was also reminiscent of price movements at the start of the current Middle East conflict nearly a year ago, as well as similar instances in April and July of this year when crypto assets fell sharply in response to headlines from the region.
However, this is just a temporary reaction and does not signal a large-scale war. You should closely monitor the developments and avoid selling hastily to avoid losing goods.
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