The looming threat of war with Iran has sent shockwaves through the cryptocurrency market, leading to a decline in prices. Bitcoin has fallen 2.1% over the past 24 hours to $75,633, while ether has dropped 3.4% to $2,244. The surge in oil prices, which has reached a four-year high of $126.41 a barrel, has also had a negative impact on the market.
The global benchmark for oil has been on a nine-day winning streak, with prices increasing by over 100% year-to-date. The conflict in Iran has led to a war premium, which refers to the portion of an asset's price driven by conflict risk rather than supply-demand fundamentals. This has resulted in a decline in risk assets across the board, with the Nasdaq 100 futures and European equities also experiencing losses.
The dollar has gained, while bonds have slid, as the surge in oil and a hawkish Fed has reduced demand for fixed income. Bitcoin's ability to withstand the early stages of the war is being tested, with the asset having held a tight band between $74,000 and $78,000 through April. 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.
Lillo believes that a resolution to the Middle East conflict and a drop in Brent crude oil prices below $100 per barrel are necessary for bitcoin to break the key $80,000 level. A possible scenario where the Trump administration lifts the blockade in coming days and frames it as a response to 'positive steps by Iran' could trigger a relief rally and pave the way for Bitcoin to consolidate above $80,000 and move toward $85,000.