Cryptocurrencies experienced a significant drop during the U.S. session on Tuesday as escalating tensions in the Middle East prompted investors to move away from riskier assets. Bitcoin (BTC), the largest digital asset by market cap, initially rose to around $64,000 during European trading before quickly falling to $62,500 after Axios reported indications from the White House that Iran was preparing for an imminent ballistic missile attack against Israel. The situation worsened when the Israel Defense Forces (IDF) announced that Iran had launched missiles at Israel, leading Bitcoin to decline further to $61,000.
As a result of the panic selling, over $489 million was liquidated in the crypto markets over the past 24 hours, with $312 million occurring within just four hours, according to Coinglass data. Long liquidations accounted for $416.6 million of the total, while short liquidations were around $73 million.
Major altcoins experienced even steeper losses, with Ethereum (ETH) down 4.31% at $2,490, and Solana (SOL) tumbling over 5.5% to $146.8. Toncoin (TON) and Dogecoin (DOGE) recorded the worst performances, plummeting 6.2% and 7.3%, respectively. The Fear and Greed Index, which measures investor sentiment, dropped from 61 points in the greed zone to 50 in neutral territory within 24 hours.
The U.S. equities market also saw declines, with the S&P 500 shrinking 1.1% and the Nasdaq Index retreating 1.85%. Nvidia (NVDA) stocks fell 4%, while Apple (AAPL) shares dropped 3.6%. In contrast, the U.S. Dollar Index rose by 0.6%, and gold prices surged by 1.1%, with the Philadelphia Gold and Silver Index (XAU) also climbing.
Jeroen Blokland, founder of the Blokland Smart Multi-Asset Fund, noted on X that investors are âliterally sellingâ Bitcoin to buy gold amid the intensifying conflict.
However, Blokland also pointed out that Bitcoin has historically provided a solid hedge against geopolitical events since 2020. He referenced a BlackRock report highlighting that BTC outperformed the 60-day returns of the S&P 500 and gold during significant geopolitical events, including the U.S.-Iran conflict and COVID outbreak in 2020, the war between Russia and Ukraine in 2022, and the U.S. banking crisis in 2023.
Bitcoinâs Tuesday drop further illustrated its high correlation with risk-on assets like stocks, while gold continued to fulfill its traditional role as a safe-haven asset. The 30-day rolling correlation between BTC and the S&P 500 is nearing yearly highs at 0.62, according to K33 Research. Despite the negative sentiment, analysts at Swissblock reiterated their bullish outlook for digital assets, according to Coindesk. They stated that âwar newsâ like that affecting markets today rarely results in a sustainable negative impact on asset prices. âWe stay bullish,â they concluded.
