Despite the success of the GENIUS Act, the digital currency sector still experiences significant losses.
Crypto Market Crash: A Middle Eastern Geopolitical Storm Hits Hard
The global crypto market took a nosedive on Tuesday, plunging by 2% to a staggering $3.26 trillion, all thanks to the simmering tensions in the Middle East. The trading volume dropped significantly by 9%, down to $121 billion, a clear sign of investor anxiety.
This sudden sell-off came hot on the heels of the U.S. Senate's historic decision to pass the GENIUS Act with a 68-30 vote, aiming to regulate crypto. Surprisingly, Bitcoin remained seemingly unfazed, losing around 2% of its value in the past 24 hours.
Altcoins Take a Bloodbath
The carnage wasn't reserved for Bitcoin alone. Major altcoins like Ethereum and Solana witnessed terrifying drops of 7-8%, with a barely visible recovery in sight. Ethereum, once soaring at $2,550, fell to around $2,450, while Solana plummeted to lower depths.
Cardano (ADA) wasn't spared either, enduring an 8% long-term drop. After a brief, fleeting rally at the beginning of the week, ADA quickly backtracked, losing over 27% of its value since the start of the year. From its all-time high of $3.10 on September 2, 2021, ADA has since plummeted by a whopping 80%. Currently, it hovers around the $0.61 mark.
Bitcoin: Safe Haven in a Geopolitical Storm?
This tumultuous phase has raised questions about Bitcoin's status as a safe haven against geopolitical upheaval. Yet, U.S.-based spot Bitcoin ETFs managed to attract a net inflow of $216 million on June 17, marking the seventh consecutive day of fund inflows. Similarly, Ethereum ETFs saw a net inflow of $11.09 million during the same period.
Interestingly, while Bitcoin hovered around $104,000, recording a loss in the last seven trading days, it also suffered a 4.8% weekly setback due to the decrease in global risk sentiment permeating the crypto market. Data from CoinGlass reveals that over $260 million worth of long positions were liquidated in the past 24 hours, with a total of 105,000 traders getting tossed out, resulting in a massive liquidation volume of over $320 million. The biggest liquidation took place on Binance, with a $4.23 million ETH/USDT position being shuttered.
Are Altcoins Just as Resilient as Bitcoin?
The recent downturn portrays an unfamiliar picture of Bitcoin's traditional role as a secure harbor amidst geopolitical turmoil. However, insights from market behavior during previous crises provide a glimpse into how altcoins, such as Ethereum, Solana, and Cardano, might respond.
Historically, Bitcoin has displayed considerable volatility during geopolitical events, reacting initially with sharp declines before recovering. Similarly, cryptocurrencies, including altcoins, tend to behave like high-risk assets during geopolitical crises, compelling investors to ditch them in favor of safer options like gold, US Treasuries, and the U.S. dollar. This flight to safety triggers short-term price drops across the cryptocurrency market.
Despite this initial panic, the crypto market traditionally recovers relatively quickly after the dust settles. Bitcoin, for instance, often recovers within about 50 days of major geopolitical crises[1][2][3]. Given this historical pattern, altcoins like Ethereum, Solana, and Cardano are likely to exhibit similar resilience over the medium to long term[1][3].
However, it's crucial to note that this analysis is informed mainly by Bitcoin's response to geopolitical crises, as explicit data linking Ethereum, Solana, and Cardano's performance solely to Middle Eastern tensions in Q2 2022 was elusive in our sources. Nonetheless, their market correlation with Bitcoin and the overall crypto risk appetite dynamics support the notion that these altcoins probably experienced volatility and potential declines during the height of tensions. As such, investors may want to exercise caution and keep a watchful eye on the crypto market amidst the ongoing geopolitical turmoil.
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Block chain technology, particularly in the realm of finance, has shown a correlation with geopolitical events. Despite the recent sell-off in the crypto market, Bitcoin ETFs’ net inflow indicates that some investors still view it as a potential safe haven amidst geopolitical uncertainty. However, the performance of altcoins like Ethereum, Solana, and Cardano during such times might mirror Bitcoin's, suggesting a degree of resilience over the medium to long term.
