Cryptocurrencies took a hit on Friday as traditional markets experienced a wave of risk-off sentiment due to escalating geopolitical tensions. Bitcoin, the leading cryptocurrency, saw a sharp drop below $66,000 after briefly touching $71,000 earlier in the day. By the end of the trading session, bitcoin had recovered slightly to $66,700, marking a more than 5% decline over the past 24 hours.
Ether, the second-largest cryptocurrency, also felt the pressure, plummeting as much as 12% to $3,100 before a slight rebound limited the loss to 8%. Smaller cryptocurrencies fared even worse, with the CoinDesk 20 Index plunging nearly 10% and coins like ADA, AVAX, BCH, FIL, and APT dropping 15-20%.
The sell-off triggered the largest leverage washout in a month, with approximately $850 million in leveraged derivatives trading positions liquidated across all digital assets, according to CoinGlass data. The majority of these positions were long bets on rising prices, caught off guard by the sudden downturn.
The market turmoil was exacerbated by fears of escalating conflict in the Middle East, with U.S. authorities issuing warnings of a potential significant attack by Iran on Israel. As a result, traditional safe-haven assets like Treasury bonds, the U.S. dollar index, and gold saw increased demand, while stock markets and cryptocurrencies faced selling pressure.
Despite the short-term market volatility, digital asset investment firm Ryze Labs remains optimistic about the long-term prospects of cryptocurrencies, citing potential policy adjustments to support the asset class. As investors navigate through the upcoming tax season, the crypto market is expected to experience some softness before potentially rebounding in the future.