The resurgence of the Iran war premium has negatively impacted the cryptocurrency market. Over the past 24 hours, bitcoin has fallen 2.1% to $75,633, while ether has dropped 3.4% to $2,244. This decline is attributed to the escalating conflict in the Middle East, which has led to a significant increase in oil prices.
The Strait of Hormuz has been effectively closed since the war began, resulting in a shortage of crude oil, natural gas, and other oil products. As a result, a war premium has been factored into the price of Brent crude, which has risen by over 100% year-to-date. The global benchmark has seen a nine-day winning streak, the longest since May 2022. Other cryptocurrencies, such as XRP and Solana, have also experienced declines, while dogecoin has seen a 3.8% increase.
The surge in oil prices and a hawkish Fed have led to a decrease in demand for fixed income, resulting in a gain for the dollar and a slide in bonds. Bitcoin's ability to withstand the early stages of the war is being tested, with the asset holding a tight band between $74,000 and $78,000. However, each escalation headline has produced a sharper drawdown, and the cumulative damage is starting to show.
According to Fernando Lillo, director at exchange Zoomex, any break above $80,000 will require the war premium to unwind, which would necessitate a resolution to the Middle East conflict and a drop in Brent crude oil prices below $100 per barrel.