Is Crypto Market at Risk of a Crash as the US-Iran Ceasefire Tested?

The crypto market remained under pressure today, with Bitcoin trading at $60,000 and Ethereum stuck at $1,580. Other tokens like XRP, Binance Coin (BNB), and Ripple (XRP) have gone sideways. This performance may be at risk as the ongoing US-Iran ceasefire gets tested.

US and Iran Ceasefire is at Risk of Failing

There is a risk that the ongoing US-Iran ceasefire is about to fail as they engage in tit-for-tat strikes. The US military struck some key Iranian targets overnight in response to Iran’s attack against a Singapore-flagged ship that tried to follow Oman’s route at the Strait of Hormuz.

In response to these attacks, Iran launched a similar offensive at Bahrain. It also launched a strike against another ship crossing the Strait of Hormuz.

While these are geopolitical issues, the reality is that they will have an impact on the crypto market. This impact comes from the fact that a resumption of the war will push crude oil prices higher, ending the ongoing plunge. West Texas Intermediate (WTI) and Brent have all dropped below the support level of $80 as more ships crossed the Strait.

The falling oil prices have been bullish for risky assets like crypto and stocks because it has led to lower inflation expectations. Falling consumer inflation will lower the possibility of the Federal Reserve hiking interest rates as officials suggested in the last meeting.

A return to war will also lead to higher market volatility, which may drive investors away from risky assets like stocks and crypto.

Spot Bitcoin and Ethereum ETF Outflows are Rising

The US and Iran ceasefire is at risk of failing at a time when demand for crypto assets is falling. Data shows that spot Bitcoin and Ethereum ETFs have continued to shed assets.

Spot Bitcoin ETFs lost over $445 million in outflows on Friday, bringing the weekly total to $1.79 billion. These funds have suffered redemptions worth over $4.1 billion this month, the worst performance this year. Their cumulative net inflows has dropped from over $66 billion to $51 billion today.

The same is happening with Ethereum, as spot ETH ETFs have lost $471 million in assets this month. They had a net outflow of $540 million in May this year.

The crypto market is losing assets in the ETF market as investors rotate to other assets. Most of these assets are flowing to the stock market, which is booming amid the artificial intelligence hype. Data shows that stock market ETFs have added over $1 trillion in assets this year.

Digital Asset Treasury Companies Woes

The crypto market may also be at risk of a crash amid the ongoing woes in the Digital Asset Treasury (DAT) industry. Michael Saylor’s Strategy stock has slumped to $82 from a record high of over $400. It is now trading at the lowest level since 2024.

At the same time, BitMine dropped to $13 from last year’s high of $160. Other companies like American Bitcoin and Strive have also continued falling this month.

This retreat is because of the ongoing challenges in most preferred stocks. The crisis began with Strategy’s STRC, which fell from its par value of $100 to $87. It then spread across other preferred stocks like Strive’s SATA and BitMine’s BMNP.

Investors are worried that companies like Strive, Strategy, and BitMine will need to raise cash to fund their dividends. Strategy has already sold 32 coins earlier this month.

In summary, cryptocurrencies are facing substantial risks in the coming months, a situation that will worsen if the Iran war resumes. They also have highly bearish technicals, suggesting that they may continue falling in the near term.