Bitcoin price dropped below $99,000 on the 23rd after the Iranian parliament approved a proposal to close the Hormuz Strait. This movement came after the United States bombed Iran's nuclear facilities yesterday.
Final approval is pending at the National Security Supreme Council. The market is preparing for the risk of energy supply disruption. Hormuz is crucial to global oil supply. Such a macroeconomic shock could significantly impact the cryptocurrency market.
Impact of Potential Hormuz Blockade
In addition to Bitcoin, Ethereum fell 3.5%, dropping below $2,200. XRP fell below $2 for the first time since April. Cryptocurrency liquidations reached $876 million in the past 24 hours. Reflecting deep risk-averse sentiment.
Why? The Hormuz Strait accounts for almost 25% of global oil transportation. Closing this bottleneck would immediately tighten global energy supply.
Oil prices could surge, which could stimulate inflation and delay central bank rate cuts.
Consequently, high energy costs will impact the entire economy. Consumers will face higher fuel prices, and businesses will face increasing transportation and production costs.
Investors are generally moving to safe assets. Capital is moving to safe assets like US Treasury bonds and the dollar, while capital is flowing out of risky assets like cryptocurrencies.
Moreover, energy-driven inflation pressure will challenge the Fed's 2% target. If the Fed suggests further tightening, real yields could rise.
Historically, high real yields burden Bitcoin. This increases the opportunity cost of holding non-yielding assets.
Cryptocurrency Market Risk... Macroeconomic Linkage
Recent cryptocurrency sell-offs reflect broader market stress. Liquidations were concentrated in long positions of Bitcoin and Ethereum. The rise in VIX and expansion of Treasury yield spreads suggest a tightening of risk budgets.
Additionally, hedge funds and individual investors often use leverage in cryptocurrencies. Sharp price fluctuations can trigger margin calls, amplifying declines.
With current leverage indicators high, continued uncertainty increases the likelihood of further declines.
Simultaneously, dollar strength is generally correlated with cryptocurrency weakness. A sharp rise in the US Dollar Index could exacerbate Bitcoin losses and push it below $100,000.
Outlook and Key Indicators
Traders should carefully watch three developments:
- SNSC Decision: Final vote on Hormuz closure.
- Oil Prices: Inflation could worsen if it exceeds $100 per barrel.
- Fed Signals: Interest rate policy statements regarding energy impacts.
In conclusion, the possibility of Iran closing the Hormuz Strait increases macroeconomic risks for cryptocurrencies.
If approved, continuous pressure is expected on Bitcoin and the broader digital asset market until geopolitical clarity and energy stability are restored.
