Bitcoin experienced a notable resurgence on Monday, reclaiming ground lost over the weekend as geopolitical tensions between Iran and Israel roiled global markets, prompting a flight to safety that buoyed the dollar to five-month highs.
The world’s largest cryptocurrency witnessed a 1.6% increase over the past 24 hours, climbing to $65,439.5 after dipping to $61,000 during the weekend sell-off.
Bitcoin‘s decline was primarily attributed to escalating risk aversion triggered by Iran’s drone and missile strike against Israel on Saturday. This geopolitical turmoil prompted traders to seek refuge in traditional safe-haven assets like the dollar and gold, exerting pressure on Bitcoin.
The surge in the dollar, reaching its highest level in 5-½ months, intensified Bitcoin’s downward pressure, as the cryptocurrency typically thrives in an environment of heightened risk appetite. Despite its reputation as a digital safe haven, Bitcoin struggled to maintain its momentum amidst the geopolitical tensions.
However, Bitcoin found some relief amid indications that the conflict between Iran and Israel might not escalate further. Reports suggested that Iran had concluded its strike, while Israeli officials were deliberating on potential responses, easing market anxieties to some extent.
In tandem with Bitcoin’s recovery, other major cryptocurrencies also rebounded from the weekend slump. Ethereum, the second-largest crypto, surged by 3.7% to reach $3,187.78, while Solana and XRP recorded gains of 7% and 3%, respectively.
Nevertheless, the crypto market’s upward momentum was tempered by concerns about the prospect of prolonged elevated U.S. interest rates following last week’s hotter-than-expected inflation data and hawkish signals from the Federal Reserve.
Traders adjusted their expectations, scaling back bets on a potential interest rate cut by the Fed in June, a scenario that could adversely impact crypto markets. Cryptocurrencies typically thrive in a low-interest-rate environment with ample liquidity, factors that fueled the 2021 bull run.
While Bitcoin saw capital inflows surge into newly-approved spot Bitcoin exchange-traded funds in U.S. markets earlier this year, recent weeks have witnessed a slowdown in these flows, adding to uncertainties surrounding Bitcoin’s future gains.
After reaching record highs of over $73,000 in early March, Bitcoin has oscillated within a range of $60,000 to $70,000 for the past month, reflecting the market’s struggle to establish a clear direction amidst evolving geopolitical and macroeconomic dynamics.
