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Following missile attacks from Iran targeting Israel, geopolitical tensions escalated, causing a drop in cryptocurrency prices on Tuesday. Ethereum fell below $2,500, and the uncertainty in global markets pushed investors toward safer assets like bonds, the U.S. dollar, and gold.
Analyst Weighs In After Iran-Israel Conflict
Quinn Thompson, founder of Lekker Capital, commented on the market’s reaction, expressing hope for a measured response from Iran. However, the potential for escalating tensions in the Middle East remains a widespread concern among investors.
Thompson stated, “Even though the likelihood of a major escalation in the Middle East is only around 20%, the market must reprice to reflect the potential risks as the outcome could be catastrophic.” He also highlighted the potential political consequences of the conflict, noting that an escalation could boost former President Donald Trump’s chances in the upcoming U.S. presidential election.
Economic Calendar and Market Concerns
Beyond geopolitical risks, Thompson pointed out that this week’s economic calendar, culminating in a key employment report from the U.S., is another factor causing caution in the markets. Many investors have engaged in routine hedge operations, further contributing to today’s sell-offs.
The wider stock market took a hit, with Nasdaq falling by 1.5% during early trading as investors fled from risky assets. While Bitcoin is sometimes regarded as “digital gold” and a safe haven, it was not immune to the sell-off, briefly dipping below $62,000.
Overbought Markets Vulnerable to Bad News
Thompson explained that both crypto and stock markets were overbought due to optimism. “Many assets were highly priced based on technical indicators, making them more vulnerable to downturns when negative news hits,” he added.
