Bitcoin bounces back after Iranian leader's death
What's the story
Bitcoin and other cryptocurrencies witnessed a sharp rebound in early Asian trading on Sunday. The surge came after Iran confirmed the death of its supreme leader during a military campaign by the US and Israel. The original cryptocurrency jumped as much as 2.21% to $68,196 following the news, recovering from a 3.8% drop the previous day.
Market response
Ether rises above $2,000
Ether, the second-largest cryptocurrency, also benefited from Bitcoin's surge. It rose as much as 4.58% to trade above $2,000. The crypto markets were initially rattled by Iran's counterstrikes on several countries and threats against US-linked bases in Iraq. However, they began to recover throughout the day, coinciding with the news of Iranian leader Ayatollah Ali Khamenei's death.
Market outlook
Traders position for Federal Reserve meeting
Markus Thielen, head of research at 10x Research, said traders don't expect the Iran conflict to have major negative economic consequences. He noted that demand for upside Bitcoin calls has clearly picked up in recent days as traders position themselves for an upcoming Federal Reserve meeting. Cryptocurrencies had recovered about $32 billion in market value by Sunday morning after losing some $128 billion the day before, CoinGecko data showed.
Market dynamics
Real price discovery expected Monday
Hayden Hughes, managing partner at Tokenize Capital, explained that Bitcoin absorbed all the selling pressure that would normally spread across equities, bonds and commodities. He added that the real price discovery will happen when US equity markets and Bitcoin ETFs reopen on Monday. This comes as missiles hit Dubai and Iranian retaliation across the Gulf raises concerns about the geopolitical situation.
Market trend
Bitcoin has lost nearly 50% of its value since November
The weekend losses for Bitcoin extend a months-long selloff in crypto markets, which started with the liquidation of some $19 billion in leveraged positions in October. The cryptocurrency has fallen nearly 50% from its record high of over $69,000 earlier this month. Justin d'Anethan, head of research at Arctic Digital, said "when critical events take place during the weekend, Bitcoin plays the role of pressure valve."
Investor strategy
Selling pressure on Bitcoin derivatives spiked
With traditional venues closed, digital-asset investors turned to tokenized commodities on decentralized exchange Hyperliquid. They did this to position for geopolitical fallout. This reaction was also seen in a spike in selling pressure on Bitcoin derivatives, with sell volume spiking by around $1.8 billion within an hour on Saturday morning, CryptoQuant data showed.