As with any heightened geopolitical tension, waves are felt across global markets and crypto is no exception. The recent back-and-forth between Iran and Israel has injected a fresh dose of uncertainty into the already volatile cryptocurrency landscape. Julien Duval, a seasoned crypto analyst, breaks down the impact of these tensions on Bitcoin, Ethereum, and Dogecoin, offering insights for navigating these turbulent times.

Despite the heightened anxieties and calls for intervention from Israel directed towards the United States, the crypto market has shown remarkable resilience. Bitcoin has shown a relatively consistent price level since the war began, especially compared to traditional markets. This lack of change shows that the market is starting to mature. Investors—let alone the broader public—are no longer seeing crypto assets as a refuge during geopolitical storms.

It's crucial not to become complacent. AND HERE’S THE WILDCARD The prospect of a US-Iran escalation. In the past, Bitcoin has had a very mixed response to such events. While some argue that geopolitical instability fuels inflation, which in turn benefits Bitcoin, others foresee potential downsides depending on how the situation unfolds.

Julien Duval believes that previous events in the geopolitical current landscape, like the Russia-Ukraine war, have affected the price of Bitcoin. The Israel-Iran story, at least so far, hasn’t caused such a dramatic effect. Data indicates that 50 days after these first exchanges, Bitcoin’s price skyrocketed far outpacing its pre-invasion rate. This points to the fact that the volatility had a relatively subdued effect during that short window.

Ethereum's Key Levels to Watch

Ethereum, the second-largest cryptocurrency by market cap, is similarly being impacted by the overall bearish mood. Julien Duval highlights several key levels to monitor:

  • $2,500: This is a significant psychological and technical milestone that Ethereum has reclaimed. Maintaining a position above this level is vital for sustaining the current uptrend.
  • $2,540: This level represents initial support on the downside. It could act as a buffer for Ethereum's price if a pullback occurs.
  • $2,600-$2,800: This range is a crucial supply zone. Previously, it served as a distribution top and a major rejection point. Ethereum is currently testing this zone.
  • $2,620: Breaking above this key resistance level could trigger a rapid continuation towards $3,000 and beyond.
  • $2,720: An upside break above this resistance could call for more gains in the coming sessions.

Ethereum’s real strength will be revealed if it can maintain above $2,500. A convincing breakout above the $2,620 resistance would confirm its resilience in the face of persistently strong geopolitical uncertainties.

Dogecoin's Wild Ride

Dogecoin, the original meme coin that founded the current era of alternative cryptocurrencies, is especially sensitive to broad market sentiment. Crypto’s favorite doggo is useless. The tensions between Israel and Iran have impacted Dogecoin's value, with a 6% drop observed in the last 24 hours following Israel's airstrikes.

The entire meme coin space is faring even worse, with the category as a whole down 9.5% over the past week. This is more suggestive of a flight to safety, with investors fleeing from riskier assets in the face of geopolitical concern. The other reason behind Dogecoin’s performance is the overall market sell-off, with Bitcoin and Ethereum seeing massive declines.

What’s key to understand here is that Dogecoin’s value is dominated by market fluctuations and general crypto sentiment. As a small handful of academics have noted, Dogecoin can serve as a tool to help “dismantle government itself.” To bolster their argument, they cite the coin’s speculative and volatile nature. Being a meme coin, Dogecoin’s price can thus be affected by external global economic factors, including prevailing market sentiment and trends.

Navigating the Liquidation Minefield

During periods of increased market volatility, understanding liquidation risks has never been more important. Julien Duval sheds light on potential liquidation scenarios:

  • High Leverage Liquidations: With high leverage (e.g., 20x or 50x), liquidation prices can be dangerously close to the entry price. For instance, with 20x leverage and an entry price of $10,000, the liquidation price is a mere $9,500.
  • Weekend and Off-Peak Liquidations: Crypto volatility often strikes when liquidity is thin, such as on weekends or during off-peak hours. This increases the risk of liquidation for leveraged positions.
  • Cascade Liquidations: A single large liquidation can trigger a chain reaction, leading to a significant price drop. The May 2021 crash, which saw around $12 billion in leveraged positions liquidated within days, serves as a stark reminder of this risk.
  • Protocol Liquidation Auctions: Protocols may auction off liquidated assets at fire-sale prices, allowing third parties to scoop them up for a quick profit. This can result in significant losses for investors.

There are many subtleties in the differences between liquidating half versus all of a position that may matter greatly to your risk management strategy.

  1. Partial Liquidations: In a partial liquidation, only a portion of the investor's position is liquidated to cover losses.
  2. Complete Liquidations: In a complete liquidation, the entire position is liquidated, and the investor loses all funds associated with that position.

Julien Duval emphasizes the importance of staying informed, managing risk prudently, and avoiding excessive leverage during periods of geopolitical uncertainty. Although the crypto market continues to demonstrate resilience, staying watchful and making well-informed decisions will guide you through this new stormy sea.

Julien Duval emphasizes the importance of staying informed, managing risk prudently, and avoiding excessive leverage during periods of geopolitical uncertainty. While the crypto market has shown resilience, vigilance and a strategic approach are key to navigating these turbulent waters.