While the end of the months-long war between the US and Iran was expected, the renewed intensification of tensions and the combination of Fed interest rate uncertainty stemming from war-induced inflation are continuing to put downward pressure on Bitcoin ($BTC).
At this point, $BTC has fallen as low as $73,000 during the day, and market analysts argue that recovery or further declines will depend on whether the price regains the $74,000 level.
While the renewed US-Iran conflict is cited as the main reason for this decline, LVRG Research Director Nick Ruck states that the decline is due to a combination of various factors.
Speaking to The Block, Nick Ruck stated, “Profit-taking following recent highs, rising US Treasury yields, and macroeconomic uncertainty stemming from geopolitical tensions have fueled risk aversion and the decline in Bitcoin and altcoins.”
Zeus Research analyst Dominick John cited the shift of funds towards traditional financial market equities and large-scale derivatives liquidations as the primary reasons for the recent Bitcoin price drop. John stated, “Liquidation pressure stemming from the collapse of key price levels for Bitcoin and Ethereum triggered further declines.”
Finally, Michael Kramer, CEO of Mott Capital Management, argued that Bitcoin is not an independently moving asset, and that macroeconomic variables such as increasing government debt also have a significant impact on its price.
At this point, the renowned CEO assessed that Bitcoin could fall even further if liquidity decreases due to the issuance of US Treasury bonds and short-term securities.
“Bitcoin is a more sensitive indicator of liquidity than most assets. If US Treasury bonds absorb market liquidity, Bitcoin could fall even more significantly.”
Further Downward Warnings Issued for Ethereum!
The decline in Bitcoin also affected the altcoin market. $BTC fell 3.2% in the last 24 hours to $73,200, while Solana (SOL) dropped 3.6% to $80.6, and XRP fell 3% to $1.28. Ethereum ($ETH) dropped 4.3% to $1,980, losing the $2,000 level for the first time in almost two months.
Analyses indicate that with Ethereum falling below $2,000, the tendency to “buy the dip” has intensified among individual investors, which is a warning sign for a decline in $ETH.
The analytics platform Santiment suggests that buying pressure during extreme dips could signal short-term price declines.
Santiment noted that sharp price drops typically create fear, uncertainty, and doubt (FUD) among investors, but the current sentiment is characterized by an increased expectation of a buying opportunity. The platform cautioned that prices tend to fall further when investor sentiment is overly optimistic. Santiment added that a better buying opportunity might emerge when genuine fear arises in the market.
“The price of Ethereum has fallen below $2,000 for the first time since March 29.”
Individual investors are reacting by suggesting that the break below the psychological support level of $2,000 actually presents a ‘buy opportunity’. However, this is happening in a situation where an overly optimistic atmosphere has formed in the current market.
Popular investors often misjudge the direction of the market. This excessive optimism can lead to the possibility of further price declines.
*This is not investment advice.
