Bitcoin Tumbles Amid Geopolitical Tensions, Highlighting Correlation with Risk Assets

Bitcoin (BTC) experienced a sharp decline on Tuesday as escalating tensions in the Middle East prompted investors to flee from risk assets. The largest cryptocurrency by market capitalization saw its price drop from around $64,000 during European trading hours to just above $60,000 by the end of the U.S. session.

The sell-off was triggered by reports of potential Iranian missile attacks against Israel. As news broke of Iran launching missiles at Israel, Bitcoin’s price took another leg down, erasing nearly all gains made since the U.S. Federal Reserve’s 50 basis point interest rate cut in mid-September.

Broader Crypto Market Follows Bitcoin’s Downward Trend

The broader cryptocurrency market also felt the impact, with the CoinDesk 20 Index dropping nearly 5%. Ethereum (ETH) fared slightly better, losing 3.8% to trade just above $2,500. Other major altcoins, including Solana (SOL), Polkadot (DOT), and Avalanche (AVAX), saw even steeper declines of 5-10%.

This price action highlighted Bitcoin’s high correlation with traditional risk assets like stocks. The S&P 500 and Nasdaq were down 1% and 1.7% respectively during the later hours of trading. In contrast, gold, often seen as a safe-haven asset, jumped 1% to near its record high of $2,700 per ounce.

Analysts Remain Optimistic Despite Short-Term Volatility

Analysts at K33 Research noted that the 30-day rolling correlation between Bitcoin and the S&P 500 is approaching yearly highs at 0.62, further emphasizing the cryptocurrency’s risk-on characteristics.

Despite the current pullback, some analysts remain optimistic about Bitcoin’s long-term prospects. Jamie Coutts, chief crypto analyst at Real Vision, pointed out that key valuation metrics have declined from extreme overbought levels in March, suggesting that Bitcoin may be undervalued on multiple timeframes.

ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

Related Articles

Bitcoin Price Prediction: BTC Eyes $150K After $110K, Amid Crypto Policy Shift

The world's largest cryptocurrency has once again proved its strength, with BTC surpassing $110,000 amid major regulatory changes and...

1 hour ago

Save

Blackstone Drops $1.08M on BlackRock’s Bitcoin ETF

16 hours ago

Save

Mantra (OM) Breakout? 500% Volume Surge Fuels $1.20 Target

16 hours ago

Save