Crypto and Stocks Fall Amid Middle East Conflict and Rising Oil Prices

In brief

Crypto fell alongside U.S. stocks as renewed military conflict in the Middle East pushed Brent crude to a 12-day high of $96 per barrel.

Rising energy costs pushed the U.S. 10-year Treasury yield to 4.5%, signaling investor concern over near-term inflation.

The drop added to pessimism deepened by Strategy's recent Bitcoin sale, according to GSR's Carlos Guzman.

The crypto market fell alongside U.S. stocks on Wednesday as oil prices ticked higher on renewed skirmishes in the Middle East, with Bitcoin hitting a more than two-month low.

The leading digital asset by market cap dropped 2.4% midday to a recent price of $65,699 after falling as low as $65,590—its lowest price since late March, according to CoinGecko. Ethereum and Solana meanwhile fell about 5% each to $1,830 and $72, respectively.

U.S. Central Command reported late on Tuesday that the military had intercepted Iranian missiles and drones, later conducting “self-defense strikes” on an island in the Strait of Hormuz—the bottleneck through which 20% of the world’s oil supply flows. The organization also flagged Iranian missiles fired toward regional neighbors such as Kuwait and Iran.

Amid negotiations to establish a lasting peace settlement and clear the strait, the exchange fueled fears of prolonged energy disruptions. Futures for Brent crude oil, the global benchmark, rose to a 12-day high of $96 per barrel as bond yields ticked higher.

On Myriad, a prediction market owned by Decrypt parent company Dastan, traders penciled in a 57% chance that crude oil rises to $120 before falling to $55.

The U.S. 10-year Treasury yield’s rise to 4.5% indicates investors are growing concerned about higher energy costs driving inflation near-term as the conflict continues to drag on, Carlos Guzman, vice president of research at crypto trading firm GSR, told Decrypt.

Guzman said Tuesday's fighting appears to have sapped enthusiasm toward AI on Wall Street, with the tech-heavy Nasdaq on track to fall nearly 1% from its all-time high close on Tuesday. The S&P 500 had also slid 0.8%, while the Dow Jones erased more than 430 points.

“There was some optimism that you’d see a resolution,” Guzman said, noting that traders are pricing in higher odds of an interest rate hike than a cut from the Federal Reserve, which typically triggers a shift away from speculative assets like stocks and crypto.

Guzman described crypto’s performance as a “continuation of the weakness we’ve been seeing,” with Strategy’s decision to sell 32 Bitcoin for $2.5 million driving pessimism among retail traders that have grown increasingly frustrated with the market.

In a note shared on Tuesday by Compass Point, analysts described Bitcoin’s plunge as a “capitulation event,” with 26% of sales over the past 320 days coming from investors who purchased the asset above the $90,000 mark.

“This cohort of top-buyers had been resilient throughout the bear market,” they wrote. “This makes us more confident that BTC's bear market is in late stages.”