The cryptocurrency market has witnessed a massive wipeout of nearly $248 million in just 4 hours coinciding with Iran’s attack on Israel. The long positions were the most affected as they accounted for most of the liquidations with $221 million liquidated as opposed to the $18 million from short positions.

This unexpected drop, chiefly due to geopolitical risks, grabbed the attention of crypto traders and highlighted the continuing instability of the market. Various tokens witnessed substantial declines as the crypto market reacted to the increasing conflict.

Bitcoin fails as ‘digital gold’ during crisis

As the liquidation unfolded, Bitcoin, often referred to as ‘digital gold’ and a safe haven in times of crisis, did not prove worthy of this title. Rather than remaining stagnant or even appreciating during the geopolitical instability, Bitcoin took a downward trajectory. This frustrated traders who hoped that Bitcoin would serve as a hedge in uncertain times. 

Adam Cochran, a crypto analyst captured this sentiment in a tweet, stating Bitcoin: “’We’re a global reserve of value like digital gold, that you want to hold in uncertain times’

Bitcoin during WWIII: *Dumps*”

Bitcoin: “We’re a global reserve of value like digital gold, that you want to hold in uncertain times”

Bitcoin during WWIII: *Dumps* https://t.co/vVVLXMuhYG

— Adam Cochran (adamscochran.eth) (@adamscochran) October 1, 2024

Cochran’s comments show how the market seems to have been caught off guard as Bitcoin behaved poorly in the recent geopolitical rift between Israel and Iran, despite its positioning as a stable asset in crises.

Major cryptocurrencies tumble as the crypto market reacts

The recent market sell-off did not only affect the price of Bitcoin. In addition, many altcoins tumbled in value as well. Well-known tokens like Shiba Inu (SHIB), Polkadot (DOT) and Worldcoin (WLD), suffered losses between 2% and 4%. Ethereum Classic (ETC) and Strike (STRK), saw even sharper declines with Strike (STRK), lowering by over 4%. The widespread nature of the losses suggests that the entire cryptocurrency market was affected by the liquidation.

This liquidation event highlights the dangers of leverage trading, where price falls activate margin calls, which leads to the sale of more assets that accelerate the downward momentum. As the liquidations accumulated, traders who had taken highly leveraged positions on the other hand were at risk which increased the overall volatility in the market.