- Bitcoin recovered to $72K as the US and Iran agreed to a two-week ceasefire.
- The parties agreed to work toward a long-term agreement based on Washington, DC’s 15-point proposal and Tehran’s 10-point proposal.
The world braced on Tuesday as US President Donald Trump issued an ultimatum to Iran. He said “a whole civilization will die” if it does not open the Strait of Hormuz, a vital maritime route that services around 20% of the world’s seaborne oil and liquefied natural gas.
The realization of such a threat would have crippled Iran’s vital infrastructures, including bridges and power plants. Meanwhile, the Middle Eastern nation has launched an offensive on the USA’s private cyber infrastructures in retaliation. However, the top brass of Pakistan urged the warring parties to extend the ceasefire to keep diplomatic channels open. Interestingly, both Washington, DC, and Tehran listened.
Abbas Araghchi, Minister of Foreign Affairs in Iran, declared on behalf of the country’s Supreme National Security Council a safe passage for sea vessels across the Strait of Hormuz for two weeks, as the US and Iran explore a workable deal to end the hostilities. He particularly agreed to negotiate on the basis of Trump’s 15-point proposal and Iran’s 10-point proposal.
Bitcoin Price Reaction
The price of BTC rallied on the positive development, rising from $67K to $72K. It came despite the $142 million in net outflows from Bitcoin exchange-traded funds (EFTs) on Tuesday and the Crypto Fear & Greed Index remaining at the “Extreme Fear” territory.
The uptrend wiped out over $428 million in leveraged short positions over the last 24 hours. Meanwhile, liquidated longs totaled $167 million during the same timeframe.
The short squeeze was triggered after traders heavily leveraged against a further breakdown of the $65K to $67K support levels, anticipating an escalation in the US-Iran conflict as the countdown to Trump’s deadline to Tehran closed in.
Bitcoin also followed the relief across the tech sector as it weathered Iran’s cyberattacks amid heightened tensions. BTC notably maintains a strong positive correlation with tech stocks, making it a high-beta proxy for the top tech indices.
A Narrow Window
Bitcoin and the broader crypto market remain susceptible to price shocks amid the fragile nature and narrow window provided by the two-week ceasefire. Retail investors will likely keep their focus on the expiration date of the temporary truce, thereby causing knee-jerk reactions to any provocation from either side, which could dampen hopes for de-escalation.
On the other hand, BTC’s status as “digital gold” will likely favor the long-term narrative. The irreversible inflation in the prices of prime commodities could act as a launchpad for decentralized assets.
Looking back at historical trends, Bitcoin tends to crash like a stock during liquidity panic. However, it eventually recovers like a safe-haven asset, akin to gold, at the threat of currency debasement.
