Crypto Sells the WW3 Narrative

WW3? Deepening conflict in the Middle East this weekend had traders fearful that the globe was on the precipice of flinging into World War 3. Should you be bidding the dip?

Iran signaled Friday that it would conduct a “calibrated” strike on Israel in retaliation to an Israeli-attributed airstrike on its Damascus consulate that occurred on April 1 and resulted in the death of seven senior Iranian military commanders. On Saturday, Iran followed through on this ominous promises, launching a barrage of over 300 drones and ballistic missiles at Israel (99% of which Israel claims to have intercepted).

Markets, which had been hammered during the Friday session, sold off on the escalation, sending Bitcoin wicking down to $60k for a total draw down 16% off its Monday local high.

While Bitcoin managed to hold its $60k range low, alts were less fortunate and found themselves victimized by indiscriminate selling, retracing to price levels that many would have considered unfathomable just the day prior; ETH dipped below $3,000 for the first time since February meanwhile SOL cratered into the $120s to retest 2023 highs.

Crypto prices bottomed within an hour of the attack and began the process of recovering at approximately 6 PM EST on Saturday after Iran’s UN mission tweeted their nation considered the matter “concluded,” fueling a rebound throughout the remainder of the weekend.

Historically, purchasing dips following sudden geopolitical conflicts has proven to be a winning strategy, but it remains unclear whether looming war was the only downside catalyst and uncertain whether the worst of this particular conflict has passed.

Equity funds experienced nearly $20B in outflows and were heavily sold throughout last week, suggesting that market participants may be cognizant of alternative risk factors, and while risk rallied into the Monday open, with the broad market S&P 500 opening green above its Friday close, asset prices plunged throughout the day’s trading session.

Israeli authorities are now promising to follow up with some form of response against Iran, and while the United States and the nations other allies have urged caution against escalation and are currently unwilling to participate in any offensive attacks, the potential that the situation continues to deteriorate remains elevated.