Bitcoin and broader financial markets, including gold and U.S. stocks, experienced significant declines following U.S. President Donald Trump’s prime-time address regarding the ongoing military conflict in the Middle East. In this address, Trump provided an update on the U.S. military campaign against Iran, named Operation Epic Fury. He claimed that after a month of operations, the U.S. had achieved major victories. According to Trump, Iran’s navy had been destroyed, its air force incapacitated, several key terrorist leaders eliminated, and the country’s missile capabilities “dramatically curtailed.”
Trump positioned the military operation as vital for preventing Iran from obtaining nuclear weapons, asserting that the core objectives of the campaign are “nearing completion.” He indicated that the U.S. would intensify its military efforts, stating, “We’re going to hit them extremely hard over the next two to three weeks. We are going to bring them back to the Stone Age where they belong.” He ended his address by proclaiming that the U.S. would soon be “safer, stronger, more prosperous, and greater than it has ever been before.”
In the wake of his address, Bitcoin, which had been trading around $69,100, dropped to lows of $66,250 by Thursday morning before recovering slightly to approximately $66,380, marking a decline of 3.3% for the day, according to CoinGecko data. The volatility in the cryptocurrency market led to over $386 million in liquidations of crypto positions within a 24-hour period, based on CoinGlass data.
Traditional financial markets mirrored this downturn. The S&P 500 fell by roughly 2%, while gold prices dipped around 4%. Interestingly, crude oil prices soared from $98 to $107 per barrel, reflecting the escalating tensions and uncertainties in the Middle East.
Additionally, the ongoing selloff in cryptocurrencies was worsened by a weakening of institutional support for the asset class. Data from SoSoValue showed that spot Bitcoin exchange-traded funds (ETFs) had experienced a significant outflow, totaling $296.18 million last week, ending a four-week streak of inflows. However, the current week has seen a modest return with inflows of $13.35 million, following a substantial outflow of $173.73 million.
According to Jeff Mei, COO of crypto exchange BTSE, the decline in risk assets is attributed to Trump’s failure to indicate any plans to reopen the Strait of Hormuz, a crucial shipping route for oil. Prediction market Myriad, owned by Decrypt’s parent company Dastan, reported a 74% chance that crude oil prices would reach $120 a barrel, an increase from 69% earlier in the week. There is also a 54% probability that the average number of ships transiting the Strait of Hormuz would remain below 15, highlighting the ongoing uncertainty in the region.
Mei pointed out that this pervasive lack of confidence stems from the sustained impact of the conflict. He warned that, even if hostilities were to cease, it might take months to secure the Strait and even longer to restore regional oil and gas production to previous levels. This delay could significantly affect economic growth across various nations and ultimately exert downward pressure on cryptocurrency prices.
