Bitcoin collapses below $63,000 due to Middle East risk... will it fall to $57,800?

▲ US, Iran, Bitcoin (BTC)/AI generated image ©

Bitcoin (BTC) has fallen below $63,000 due to re-escalating tensions between the US and Iran, coupled with signs of weakening liquidity in the cryptocurrency market. Furthermore, the stablecoin market has experienced its largest contraction since the collapse of TerraUSD in 2022, raising concerns about weakened buying power in the market.

According to investment media FXStreet on July 8 (local time), Bitcoin continued its downward trend after failing to break the $64,000 resistance level, trading below $63,000. The outlet reported that tensions in the Middle East re-escalated after the US launched additional airstrikes on Iran following an attack on an oil tanker in the Strait of Hormuz, weakening risk asset preference and putting downward pressure on Bitcoin. The Iranian Revolutionary Guard Corps (IRGC) stated that it targeted 85 US military facilities in Bahrain and Kuwait, citing the US's violation of a ceasefire agreement, and claimed to have shot down a US MQ-9 drone in the southern region. The US also withdrew key sanctions relief measures that had allowed Iran to sell international crude oil.

The outlet analyzed that these clashes heightened concerns about disruptions to oil supplies in the Strait of Hormuz, pushing up international oil prices and threatening the unstable ceasefire between the US and Iran, thereby dampening investment sentiment for risk assets like Bitcoin. It also added that if clashes between the two sides further escalate this week, the magnitude of Bitcoin's price correction could expand.

Slowing market liquidity was also cited as a burden. According to data released by Walter Bloomberg via X, the stablecoin market size in June recorded $312 billion, a 2.4% ($7.7 billion) decrease from the previous month. This marks the largest monthly decline since the collapse of TerraUSD in 2022. During the same period, Bitcoin's price also fell by approximately 20%, and the outlet explained that if this trend of stablecoin supply contraction, which signifies reduced new capital inflow and weakened buying power in the cryptocurrency market, continues into July, additional selling pressure could emerge.

Institutional funds saw some inflows, but it was insufficient to support the market. According to SoSoValue data, Bitcoin spot ETFs recorded a net inflow of $21.44 million on the 8th, marking three consecutive trading days of inflows. However, the inflow amount was limited compared to the large net outflows seen in recent weeks, and the outlet assessed that if ETF fund flows revert to net outflows, the possibility of further Bitcoin correction could increase.

Technically, the short-term bearish trend persists. Bitcoin is trading below its 50-day, 100-day, and 200-day Exponential Moving Averages (EMA) of $65,577, $69,225, and $75,269, respectively. The Relative Strength Index (RSI) remains at a neutral level around 48, and while the Moving Average Convergence Divergence (MACD) is still in positive territory, it signals that bearish pressure has not been fully alleviated. On the upside, $64,004 is presented as the primary resistance level, and on the downside, if it falls below $62,000, the outlet predicts that the correction could extend to the year's low of $57,800 recorded on July 1.

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