① Last weekend, U.S. President Trump announced that U.S. fighter jets attacked three nuclear facilities in Iran, raising concerns about escalating tensions in the Middle East; ② The market worries that Iran may block the Strait of Hormuz, disrupting 20% of global oil trade and driving up oil prices; ③ Due to expectations of rising inflation and hindrances to the Federal Reserve's interest rate cuts, investors largely sold off digital currencies including Bitcoin on Sunday, quickly causing Bitcoin prices to drop, although they have now rebounded.
On June 23, Financial News reported (Editor: Ma Lan) that last weekend, U.S. President Trump announced on social media that U.S. fighter jets had attacked three significant nuclear facilities in Iran, raising concerns about further escalation of tensions in the Middle East.
The market is particularly focused on Iran's next actions regarding the Strait of Hormuz. If this passage is blocked, approximately 20% of global oil trade will be disrupted, quickly driving up oil prices. This also led to a peak in risk aversion sentiment on Sunday.
In light of the expectation that oil prices may rise, some investors quickly sold off digital currencies including Bitcoin on Sunday, as they believe inflation is about to rebound, thus limiting the Federal Reserve's willingness to cut interest rates further.
On Sunday night, Bitcoin quickly fell below the $100,000 mark, dropping to around $98,500. As of the time of this report, Bitcoin's price has slightly rebounded and is back above $100,000. Solana, XRP, and Dogecoin also experienced significant declines during the same period, dragging down the overall performance of the cryptocurrency market.
Additionally, some Institutions believe that digital currencies like Bitcoin are now more akin to speculative assets rather than safe-haven assets, which means investing in Bitcoin does not necessarily provide safety and stability to investment portfolios in a rapidly changing macroeconomic environment.
Interpretation of the sell-off
JPMorgan previously predicted the worst-case scenario, including Iran blocking the Strait of Hormuz, which would lead to rising international oil prices. Following the U.S. attack on Iran on Sunday, JPMorgan reported seeing more than 50 large cruise ships hurriedly leaving the Strait of Hormuz, anticipating an immediate drop in supply and a consequent increase in oil prices.
This macroeconomic risk is a key factor driving investors to sell off Cryptos. Independent research agency The Kobeissi Letter points out that a surge in oil prices may push U.S. inflation levels back up to 5%, the highest level since March 2023.
On the other hand, based on the recent correlation between Bitcoin and U.S. Technology stocks, Bitcoin behaves more like a CSI 300 High Beta Technology stock in the current market environment.
According to the cryptocurrency data provider Kaiko, the correlation of Bitcoin with the Nasdaq Index, which has a high proportion of Technology stocks, saw a sharp increase in recent weeks after hitting a multi-month low earlier this year, coinciding with a surge in Inflow into Bitcoin spot ETFs.
Mutually reinforcing, from last Monday to Wednesday, over 1.04 billion dollars flowed into the Bitcoin spot ETF. However, there was zero Inflow during the two trading days on Thursday and Friday, when Trump announced a two-week review of the situation in Iran. This dynamic largely reflects the Institutions' perception of the risks associated with Bitcoin.
Finally, the sell-off of Bitcoin may also involve technical issues. Research by CoinGlass shows that when Bitcoin fell below 99,000 dollars, forced liquidations occurred at Exchanges like Binance and Bybit. During the peak period, over 1 billion dollars worth of cryptocurrency positions were liquidated within 24 hours, with more than 95% coming from long positions, highlighting the degree of market overexposure before the weekend.
