Why Is Bitcoin Price Down Today?

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As a seasoned crypto investor with a decade of experience under my belt, I’ve seen more than a few market rollercoasters. The recent downturn in Bitcoin and altcoins, following the escalation between Israel and Iran, is a stark reminder that the crypto market isn’t immune to geopolitical tensions.

On Tuesdays when tensions rose between Israel and Iran, the value of Bitcoin and the overall cryptocurrency market took a significant hit. This unfortunate event set a bearish tone for what was supposed to be Bitcoin’s most promising month on record. At present, Bitcoin’s price has dropped by 3.16%, reaching approximately $61,715. Meanwhile, other altcoins, with Ethereum leading the pack, have experienced a steep decline ranging from 5% to 10%.

Bitcoin Price and Altcoins Face Huge Selling Pressure

As an analyst, I’ve noticed a shift in the cryptocurrency market following one of the strongest Septembers in over a decade for Bitcoin and altcoins. Despite initial bullish momentum that pushed Bitcoin prices above $65,000, we’ve seen a surge in selling pressure recently. This trend intensified on Tuesday when tensions between Iran and Israel escalated, with Iran firing 200 ballistic missiles. These geopolitical events seem to have added fuel to the bearish sentiment in the crypto market.

Despite dropping by 4% within the initial two days of October, Bitcoin’s history shows it typically gains 20%. Sean McNulty, director at Arbelos Markets, describes this dip as a “temporary hiccup.” He further remarks that the traditional trend of October being Bitcoin’s strongest month remains robust.

Markets will stay tense due to Israeli Prime Minister Benjamin Netanyahu’s promise of retaliation following Iran’s recent attacks. On Tuesday, the Bitcoin ETF saw a significant withdrawal of $242 million, ending eight consecutive days of inflows. Some market experts predict that Bitcoin may not reach its record high before mid-November at the earliest. Furthermore, the decline in US PMI data suggests a contracting economy, adding to the downward pressure on sales.

According to renowned crypto expert Benjamin Cowen, Bitcoin’s price surged for two weeks following the Federal Reserve’s rate cuts in 2019 before dipping to its 100-week Simple Moving Average (SMA) about two months later. If this pattern were to repeat itself, the correction could potentially dip down to the $50,000 price range by mid-November, as suggested by Cowen’s chart.

To provide a fresh perspective that diverges from the common “up only” sentiment on this platform, it’s worth noting that in 2019, Bitcoin (#BTC) experienced a two-week surge following the first interest rate cut. However, approximately two months later, it dipped down to align with the 100-week Simple Moving Average (SMA), which roughly coincides with mid-November.
— Benjamin Cowen (@intocryptoverse) October 2, 2024

Amid rising tension in the Middle East, investors are seeking refuge in secure investments like bonds, gold, oil, and the US Dollar. Additionally, according to a JPMorgan report, the income of Bitcoin mining companies reached record lows in September. Should these miners continue to struggle, it could lead to another rapid sell-off in the near future.

How the Israel-Iran War Can Impact the Market

In general, conflicts like wars tend to trigger immediate responses in financial markets. Yet, past patterns can offer useful insights. After Russia invaded Ukraine in February 2022, the S&P 500 dropped by 11.5% within three months. Given that Bitcoin’s performance is closely linked with the S&P 500, it will be intriguing to observe how Bitcoin’s price reacts in the coming days as the Israel-Iran conflict develops.

In response to mounting tension in the Middle East, the U.S. stock market mirrored this reaction on Tuesday, with the S&P 500 closing down by 1%. Conversely, oil prices shot up by 5%, reflecting the market’s anticipation of a potential armed conflict.

According to historical market trends outlined in the Kobeissi Letter, it’s been observed that an average decline of about 2% in the S&P 500 typically occurs when a significant conflict starts. The overall drop during these events averages at -8.2%, yet various other factors influencing returns should be taken into account.

Whether a war occurs during an economic downturn (recession) or not is crucial. If the economy isn’t experiencing a recession, the average return for the S&P 500 over a 12-month period in a war year tends to be around 9.5%. Conversely, if a war occurs during a recession, these returns often drop to -11.5% instead.

The Kobeissi Letter references the 9/11 event in 2002, during which the S&P 500 dropped by 18%, happening when the market was already experiencing a recession. It’s intriguing to observe whether a Fed stimulus package can prevent a U.S. recession in 2023.

A more recent example would be the 9/11.

This happened during a time that the economy was already in a recession.

It’s worth noting that this occurred during a period where the Federal Reserve had been increasing interest rates, a practice they’ve followed since the year 2022.

The S&P 500 fell -18% in 12 months after 9/11.

— The Kobeissi Letter (@KobeissiLetter) October 1, 2024

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2024-10-02 08:42