Sunday’s brief rally did not extend into Monday.
Bitcoin fell to $66,702 in early trade on Monday, down 1.1% in the past 24 hours, as traditional markets reopened and began pricing in the U.S.-Iran conflict, with the cryptocurrency having been trading in isolation since Saturday.
Sunday’s rally to $68,000 following Khamenei’s confirmation has now largely unwound, with the market back to pre-strike mid-$66,000 range.
The broader cryptocurrency outlook is mixed. Ethereum fell 2.5% to $1,967, solana fell 4.1% to $84, and XRP fell 3.6% to $1.36. Weekly data reflects the true losses, with Solana down 8.1% over seven days, the largest decline among major exchanges.
Traditional markets tell the story of cryptocurrency expectations. Brent crude oil soared as much as 13% at the opening before finally closing at around $77.50, still up 6.4%, the largest gain since Russia’s invasion of Ukraine in 2022.
About a fifth of the world’s oil flows through the Strait of Hormuz, which is effectively closed, according to Bloomberg. Asian stocks fell 1.4% and U.S. stock futures fell 0.7%. Gold prices climbed to $5,350 an ounce.
Oil movements are the most important for the near-term direction of cryptocurrencies. Rising energy prices directly exacerbate inflation expectations, delaying the Fed’s timetable for rate cuts, thus tightening liquidity conditions that drive higher risk asset prices.
But the situation remains fluid. Conflicting reports emerged on Monday about whether Iran is seeking to resume nuclear talks with the United States. The Wall Street Journal reported that Iran was pushing for new negotiations, while Iran’s national security chief Ali Larijani said the country would not enter into negotiations.
Earlier on Sunday, Trump said the bombing campaign would continue until its goals were achieved, despite a report in The Atlantic that he agreed to talks with Iran’s new leadership.
At the same time, some cryptocurrency traders said the risk of further market downside may be limited.
“Given that Iran has been isolated from global financial markets for quite some time, we believe the downside risks are limited,” said Jeff Mei, chief operating officer of BTSE.
“Some have been concerned about oil prices and their potential impact on inflation, but the world has moved away from dependence on Iranian oil and increased supply from OPEC and the United States should be enough to stabilize prices.”
Whether this is correct depends on whether the Strait of Hormuz reopens and how long it takes for Trump’s “goal” to be achieved. Until these two questions are answered, cryptocurrency trading will remain a risky asset in an increasingly risky world.