Bitcoin Falls to Two-Month Low Amid Middle East Tensions
In brief
- Bitcoin fell 2.4% to $65,699, lowest since late March
- Brent crude surged to 12-day high of $96/barrel on Middle East escalation
- U.S. 10-year Treasury yield climbed to 4.5%, reducing risk appetite
- Ethereum and Solana each declined ~5% in broader market pullback
Middle East Tensions Rattle Markets
U.S. Central Command reported late Tuesday that the military had intercepted Iranian missiles and drones and conducted self-defense strikes on an island in the Strait of Hormuz. The Strait of Hormuz is the bottleneck through which 20% of the world's oil supply flows, making even brief skirmishes a catalyst for broader market repricing.
Futures for Brent crude oil, the global benchmark, rose to a 12-day high of $96 per barrel as bond yields ticked higher. The U.S. 10-year Treasury yield climbed to 4.5%, a move that typically pressures equities and crypto by raising the cost of capital and reducing the appeal of zero-yield assets.
Crypto and Equities Follow
Ethereum and Solana meanwhile fell about 5% each to $1,830 and $72, respectively. Broader equity markets reflected the same unease. The S&P 500 had slid 0.8%, while the Dow Jones erased more than 430 points. The tech-heavy Nasdaq was on track to fall nearly 1% from its all-time high close on Tuesday.
Carlos Guzman, vice president of research at GSR, attributed some of the selloff to a shift in trader sentiment. Guzman said Tuesday's fighting appears to have sapped enthusiasm toward AI on Wall Street—a sector that had driven much of the market's recent strength.
Rate Expectations Shift
The geopolitical move also altered expectations for Federal Reserve policy. Traders are now pricing in higher odds of an interest rate hike than a cut from the Federal Reserve. This repricing reflects a tradeoff: higher oil prices feed inflation concerns, potentially forcing the Fed to hold rates steady or tighten further despite softer economic data.
On-chain data underscored the capitulation mood. Compass Point analysts described Bitcoin's plunge as a capitulation event, with 26% of sales over the past 320 days coming from investors who purchased above $90,000. Prediction markets echoed the uncertainty. On Myriad, traders penciled in a 57% chance that crude oil rises to $120 before falling to $55.
