The cryptocurrency market has witnessed a decline of \(430 billion in capitalization since April 12, coinciding with an unprecedented offensive by Iran against Israel. Traders faced liquidations exceeding \)2 billion, primarily impacting Bitcoin (BTC) with losses amounting to $500 million in an immediate risk-off response.
The market downturn commenced a day before the Iranian airstrike on Israel garnered global attention. On April 13, Finbold reported a \(150 billion plunge, with cryptocurrency traders seeing nearly \)1 billion liquidated within a 24-hour period. Notably, this occurred before public confirmation of the subsequent escalation of hostilities in Iran.
Subsequently, cryptocurrencies experienced another blow following the unfolding events on Saturday night, prompting a panic sell-off. TradingView’s Total Crypto Market Cap Index reflected a $429.11 billion decrease in the 48 hours leading up to the attack, resulting in a 17% downturn.
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The index now stands at a capitalization of \(2.258 trillion, showing a partial recovery from the slump to \)2.098 trillion amidst concerns over the ongoing offensive. Historical data indicates that geopolitical tensions, such as warfare, have had significant repercussions on volatile assets like Bitcoin and stocks.
Total Crypto Market Cap Index, daily chart. Source: TradingView/Finbold
Impact of the $2 billion cryptocurrency market crash
Presently, data from CoinGlass reveals \(961.25 million in cryptocurrency liquidations within the derivatives market. This figure complements the earlier reported liquidations of nearly \)1 billion preceding the drone and missile attacks between Iran and Israel.
Interestingly, the recent liquidation event predominantly affected ‘Other’ cryptocurrencies rather than Bitcoin and Ethereum (ETH). However, in the aftermath, these two prominent projects incurred substantial losses, with Bitcoin traders facing over $500 million in losses during this 48-hour period.
Noteworthy is the largest individual liquidation on Binance involving the BTC/USDT pair, resulting in losses amounting to \(8.46 million. Once again, long positions bore the brunt of the cryptocurrency market downturn, with \)771.15 million in long liquidations.
Liquidation Heatmap in 24 hours. Source: CoinGlass
The QCP Capital Broadcast highlighted Bitcoin’s significant decline, suggesting it acted as a pivotal indicator for financial markets.
“It is likely that BTC was used as a weekend proxy macro hedge and therefore bore the full brunt of the immediate risk-off reaction.”
– QCP Broadcast
Future Outlook post the Iranian offensive
Conversely, gold-backed cryptocurrencies displayed a notable premium compared to gold indexes. Particularly, Pax Gold (PAXG) surged to \(2,855 amidst the market turmoil, now stabilizing at \)2,433 per ounce. TradingView’s gold index currently sits at \(2,343 per ounce, reflecting a \)100 variance from PAXG’s prevailing exchange rate.
Traditionally, gold, a renowned hedge and leading commodity, attracts investors seeking wealth protection during periods of conflict and uncertainty. This trend manifested over the weekend following Iran’s drone attack on Israel.
Meanwhile, Ari Paul, founder of BlockTower Capital, expressed optimism regarding a potential de-escalation of tensions.
Fingers crossed that Iran-Israel may de-escalate here. Iran fired their 300+ drones and rockets, early reports are that 99% were shot down, minimal damage. That may be ideal scenario for Iran to check the box on retaliation, without Israel needing to retaliate for fresh damage.
— Ari Paul ⛓️ (@AriDavidPaul) April 14, 2024
Fear, uncertainty, and doubt currently dominate the sentiments, with attention shifting towards the War of Gaza. Subsequent developments will dictate the market’s trajectory in the days ahead.
Pax Gold (PAXG) 24-hour price chart. Source: Finbold