As geopolitical tensions escalate in the Middle East, investors are pulling back from both equities and cryptocurrencies. The global cryptocurrency market has dropped by approximately 5.5% since the beginning of the week, based on data from CoinGecko.
Among the top cryptocurrencies, Ethereum and Solana have taken the hardest hits, with Ethereum falling below $2,500 and Solana dropping under $150.
The situation intensified when air raid sirens sounded across Israel at around 7:30 p.m. local time, as reported by Haaretz. Explosions were heard in major cities like Jerusalem and Tel Aviv. The missiles were launched shortly after reports emerged that Iran was preparing a retaliatory strike against Israel, following its ongoing airstrikes on Hezbollah positions in Lebanon.
The attack has heightened concerns of a direct confrontation between Israel and Iran, two key regional powers. Israel’s efforts to counter Iranian influence in the region—through groups like Hamas in Gaza, Hezbollah in Lebanon, and the Houthis in Yemen—have been ongoing. However, the possibility of a larger conflict has sparked renewed fear in global markets.
Quinn Thompson, founder of Lekker Capital, shared that despite concerns, many believe Iran’s response will likely remain restrained. “A full-scale conflict could increase the electoral chances of Donald Trump in the upcoming U.S. presidential election, a scenario Iran would likely want to avoid,” Thompson told DL News.
Still, markets tend to price in potential risks. “Even if there’s only a 20% chance of a major escalation in the Middle East, the severity of such an event would still force markets to adjust accordingly,” Thompson added.
Adding to the uncertainty, investors are also bracing for key economic reports, including Friday’s jobs data. With this, routine hedging is expected, putting further pressure on markets.
Equities took a hit on Tuesday, with the Nasdaq falling 1.5% shortly after markets opened. Investors shifted their focus toward safer assets such as bonds, the U.S. dollar, and gold.
Despite being dubbed “digital gold,” Bitcoin wasn’t spared from the sell-off, briefly dipping below $62,000. Thompson noted that this decline was in line with expectations. “Both stocks and crypto were inflated by over-optimism. When bad news hits, especially in already overbought markets, corrections are inevitable,” he explained.
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