The escalation of the situation in the Middle East caused Bitcoin and almost all cryptocurrencies to fall, sowing panic among investors and increasing risk aversion.
The price of Bitcoin fell sharply on Saturday, posting its biggest drop since March 2023, Bloomberg reported.
The drop was 7.7%, and the price hit a low of $60,660. Bitcoin has since recovered some of its losses and was trading around $64,309 at the time of writing.
Other representatives of the crypto market, Ethereum, Solana, XRP, and Dogecoin, also showed a fall during the day of up to 10%.
Investor panic was caused by Iran's attack on Israeli territory, which involved using drones and missiles. Iran called it "retaliation" for the attack on Syria's Damascus, where top Iranian military leaders were killed.
The New York Times writes that more than 330 targets were launched: 185 drones and 146 missiles, some launched from Iraq and Yemen. Israel was assisted in repelling the attack by the US, Britain, and Jordan. After the attack ended, the Israeli side said 99% of the targets were shot down on approach, but there were a small number of hits.
Israel is expected to launch retaliatory strikes. The US will also get involved, having already reaffirmed its "ironclad support" for the country's security. Israel's armed forces are far superior to Iran's when it comes to technology. However, Iran has a huge stockpile of cheap but effective weapons in its arsenal.
Traditional markets will open on Monday and show their reaction to what is happening, while crypto markets, which were active over the weekend, reacted immediately to the situation.
"The continuation of the cryptocurrency sell-off will depend on further escalation," said Zaheer Ebtikar, founder of crypto fund Split Capital.
Assets such as bonds and the dollar strengthened on Friday on the back of high tensions and information about an imminent Iranian attack. Meanwhile, bullish bets on cryptocurrency derivatives worth more than $2 billion ($1.5 billion in long positions and $500,000 in short positions) were liquidated, marking the largest two-day liquidation order in recent memory. The largest liquidation order occurred on cryptocurrency exchange Binance, when an unknown person sold $8.46 million worth of BTC.
Traders appear to be bracing for further declines. If the price of Bitcoin returns to the $67,000 level in 24 hours, short positions totaling $1.05 billion will be liquidated.
Ebtikara explained that leverage has "completely overflowed in recent days, causing a significant price drop in the crypto market.
Bitcoin dropped a whopping $10,000 from $73,798, sending shockwaves through the market. Meanwhile, the price of the asset is also affected by expectations of a halving scheduled for April 20th. Historically, Bitcoin retreats from its positions before this event and shows significant growth for some time after the halving.
The Fear and Greed Index, the main tool for tracking market sentiment in the cryptocurrency market, is currently at a greed level of 72, down slightly from last week's extreme greed level of 78.
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