[HOT] Bitcoin falls sharply below $100,000 as Iran threatens to close the Strait of Hormuz

The price of Bitcoin unexpectedly plummeted to $99,646 after the Iranian Parliament approved a proposal to close the Hormuz Strait — a dramatic decision that came less than 24 hours after the American airstrike on Iran's nuclear facilities.

This proposal is currently awaiting final approval from Iran's Supreme National Security Council. In the meantime, instability pervades global financial markets as the risk of energy supply chain disruptions becomes increasingly evident. The Strait of Hormuz – the strategic artery of the world's oil flow – if blocked, will create a major macro shock capable of deeply shaking not only the energy market but also the highly sensitive cryptocurrency market.

Impact from the risk of closing the Hormuz Strait

Not only did Bitcoin plummet, but Ethereum also lost up to 4% of its value, sliding below the $2,200 threshold. Meanwhile, XRP fell below the $2 mark for the first time since April. The total value of liquidations in the cryptocurrency market exceeded 950 million USD in just 24 hours, indicating that the wave of flight from risky assets is spreading among investors.

BTC/USDT hourly chart | Source: TradingViewWhat is causing the market to panic? The answer lies in the Strait of Hormuz – the lifeblood transporting about 25% of the world's oil supply. If this route is blocked, the world will immediately face the risk of severe energy shortages.

The scenario of oil prices skyrocketing is inevitable, leading to rising inflationary pressures and potentially causing central banks to delay their plans for interest rate cuts.

Higher energy costs will quickly spread throughout the economy. Consumers will bear the burden of expensive fuel bills, while businesses struggle with rising operating and production costs.

Amid the uncertain outlook, capital is flowing strongly into safe-haven assets such as U.S. Treasury bonds and the USD, while withdrawing from risk markets like cryptocurrency.

Global oil supply through the Strait of Hormuz | Source: X/The Kobeissi LetterNot stopping there, surging energy prices could hinder the Federal Reserve's efforts to bring inflation in America (Fed) down to the 2% target. If the Fed is forced to signal a continued tightening policy, real yields may continue to rise.

Historically, high real yields often put significant pressure on Bitcoin – as the opportunity cost of holding a non-yielding asset increases, the attractiveness of cryptocurrency diminishes markedly.

Risks of the cryptocurrency market and macro links

The recent wave of cryptocurrency sell-offs is not just an isolated phenomenon, but rather reflects the widespread tension across the global financial market. The liquidation pressure is heavily concentrated on (Long) positions of Bitcoin and Ethereum, indicating that investor sentiment is leaning towards a defensive stance. The rise in the VIX volatility index, along with the continued widening of U.S. government bond yield spreads, further reinforces signs that risk appetite is rapidly declining.

One contributing factor amplifying the decline is the high leverage used by hedge funds and individual investors. In the context of strong price fluctuations, margin calls (margin call) were triggered en masse, creating a domino effect that pushed prices to plummet even further.

More concerning, the leverage indicators are still in the high range, indicating that the risk of a deep drop is still present if the instability does not ease.

At the same time, the strengthening USD continues to be a barrier for the cryptocurrency market. If the USD Index maintains its upward trend, Bitcoin could very well be pushed back to the price zone of $95,000.

Prospects and Key Factors to Watch

Investors need to pay special attention to the following three key factors:

1. The final decision of the Supreme National Security Council of Iran – This will be the decisive step in determining whether to officially close the Strait of Hormuz, a strategic maritime route of the world.
2. Oil Price Developments – If oil exceeds the threshold of 100 USD per barrel, global inflationary pressure will increase significantly, leading to strong fluctuations in the financial markets.
3. Message from the Federal Reserve of America (Fed) – Statements regarding interest rate policy, against the backdrop of rising energy prices, will shape market expectations in the short term.

In general, Iran's proposal to blockade the Strait of Hormuz is creating a potential macro shock to the cryptocurrency market. If approved, Bitcoin and digital assets will face prolonged selling pressure until there are clearer signals regarding the geopolitical situation and the stability of global energy supply.

SN_Nour