Crypto Market Weekly Review: Escalating Geopolitical Conflicts Trigger Market Fluctuation

This week, crypto assets have undergone a triple test of institutional funding support, rising derivative risks, and a surge in geopolitical risks. Bitcoin continues to fluctuate in the range of $102,000 to $109,000, experiencing a brief drop over the weekend due to the U.S. raid on Iran's nuclear facilities, followed by a partial recovery.

The internal structural forces of the crypto market remain stable, becoming an important factor supporting prices. However, intensified geopolitical conflicts have led short-term traders to price Bitcoin downward. Under stable internal structures, the subsequent trend of Bitcoin will mainly depend on the development of the Israel-Palestine conflict. If the conflict gradually eases, Bitcoin is likely to return to around $105,000.

Political Situation and Macroeconomics

This week's Israel-Palestine conflict is showing a spiral escalation trend.

From June 16 to 18, Israel conducted precision airstrikes on targets within Iran, to which Iran retaliated with missiles and drones, escalating tensions. The market immediately entered defense mode, with significant increases in oil and gold prices.

On June 19, the White House publicly stated for the first time that it is assessing military options, marking the beginning of the United States' public intervention. This news drove crude oil futures higher, the VIX Fluctuation Index rose, while U.S. Treasury yields experienced a safe-haven decline.

On June 20, the market briefly showed signs of easing, but this was quickly broken. In the early hours of the 21st, the President of the United States ordered precise bombings on three nuclear facilities in Iran, claiming that Iran's key nuclear capabilities had been "reset to zero."

This move immediately triggered a severe diplomatic upheaval. The UN Secretary-General described the situation as "extremely precarious," while the EU and the UK urged all parties to exercise restraint. Iran accused the United States of violating international law and threatened to take retaliatory action, even not ruling out the possibility of blocking the Strait of Hormuz.

Due to the airstrike occurring on the weekend, the main financial markets' reactions will be revealed next Monday. However, derivatives and offshore trading have provided forward-looking signals: energy and military industry ETFs rose in after-hours trading, crude oil options trading was active, while high-risk crypto assets faced selling pressure, with Bitcoin down 1.14% and Ethereum's decline exceeding 2.96% at one point.

This week's direct intervention by the United States has led to an escalation of the conflict, pushing Bitcoin down 4.36% for the week. If Iran takes further retaliatory actions, it could put greater pressure on global stock markets and crypto assets.

crypto market performance

At the beginning of this week, the market's expectation of the "controllable" nature of the Israel-Palestine conflict led to a slight rebound, with Bitcoin reaching a high of $109,000. Continuous inflow of institutional funds has become a key factor supporting the price.

The FOMC decision announced on June 19 did not have a significant impact on Bitcoin's trend, but the futures market shows an increase in hedging scale.

On Friday, the Ethereum ETF experienced a significant net outflow, triggering a chain reaction, with the price of Ethereum briefly dropping to $2372, which also led to a pullback in other high-risk assets.

During the U.S. stock trading session on June 20, a round of high-leverage liquidations caused Bitcoin to quickly fall below $103,000, with assets like Ethereum and Solana experiencing declines of 6-9%. This "flash crash" event highlights the vulnerability of high leverage in the derivatives market.

Over the weekend, news of the U.S. airstrikes on Iranian nuclear facilities triggered a new round of Fluctuation. Bitcoin temporarily fell below $100,000 but the decline was relatively limited, closing down 1.14%. In contrast, Ethereum dropped another 2.96% after consecutive days of significant declines, indicating that the liquidity of high-risk assets is extremely fragile.

From a technical perspective, the geopolitical conflict has caused Bitcoin to temporarily break below the first upward trend line, but it is still operating within the range of $90,000 to $110,000. The internal structural forces of the market remain intact, and the funding support is relatively stable. This week's decline is mainly due to panic sentiment triggered by geopolitical issues. If the conflict escalates further, it may test the key support levels of $100,000 and $90,000.

Capital Flow Analysis

After a significant rebound in April and May, capital inflows have shown a divergence. The inflow of funds through stablecoin channels has weakened, while the capital flow through Bitcoin spot ETF channels remains relatively strong and stable.

This week, Bitcoin spot ETF net inflows amounted to $1.022 billion, a decrease from last week's $1.384 billion, but still maintaining a high level. However, if geopolitical conflicts continue to affect the U.S. stock market, this data may face challenges next week.

In terms of stablecoins, there was an inflow of 1.273 billion last week, while this week it has turned into a net outflow of 132 million. This trend is consistent with the observations in the contract market and the lending market.

Ethereum spot ETF had a net inflow of $40.77 million this week, but saw outflows of over $100 million on Friday. The decrease in the scale of fund inflows may put high-risk assets under pressure, and a sharp decline could have a significant impact on the market.

Position Changes

Against the backdrop of delayed interest rate cut expectations and rising geopolitical risks, Bitcoin prices remain at high levels of $100,000 to $120,000, primarily benefiting from institutional allocations and the structural forces within the market.

This week, long positions increased by 28,920 coins, while short positions decreased by 24,650 coins, and the inventory in centralized exchanges continues to decline. Due to panic selling and weakened speculative enthusiasm, the net outflow from exchanges has significantly decreased to 1,555.9 coins.

These data may indicate that long-term holders' confidence in Bitcoin continues to strengthen, but short-term traders' enthusiasm is rapidly cooling. The short-term trend of Bitcoin will be determined jointly by on-site short-term traders and spot ETF funds. Currently, both are showing signs of cooling.

If the Israeli-Palestinian conflict can be resolved quickly, Bitcoin may return to around $105,000. However, if the situation worsens, it is likely to fall below $100,000 and even test the $90,000 support (with a lower probability).

In the medium to long term, the fundamental logic of Bitcoin price trends has not changed, unless the conflict between Israel and Palestine escalates into a regional war involving direct U.S. participation.

Cycle Indicator

According to eMerge Engine data, the EMC BTC Cycle Metrics indicator is 0.625, in an upward phase.