Bitcoin collapses below $80,000 due to Iran-led woes, will it defend support and rebound?

▲ Strait of Hormuz, Bitcoin/ChatGPT generated image ©

As Iran abruptly rejected the US peace proposal, geopolitical tensions in the Middle East escalated once again. This poured cold water on the market, causing Bitcoin (BTC), the leading cryptocurrency that had been on an upward trend, to slide below $80,000. While a short-term shock occurred due to the cascading liquidation of excessively accumulated leveraged positions, the underlying demand in the spot market remains robust, drawing attention to whether the support line will be defended in the future.

According to CoinMarketCap, a cryptocurrency market data aggregator, on May 8 (local time), Bitcoin recorded a 1.89% drop over the past 24 hours, reaching $79,888.67, effectively giving back all of its gains for the week. The primary cause of this sharp decline is the widespread risk-off sentiment following news of Iran's rejection of the peace proposal. The collapse of settlement expectations and fears that US President Donald Trump could escalate the response, including military action, have gripped the cryptocurrency market.

Overheated leverage in the derivatives market also acted as a catalyst, amplifying the decline. According to Coinglass data, a total of $89.75 million worth of positions were forcibly liquidated in the Bitcoin market over the past 24 hours, with long positions, anticipating a rise, accounting for $79.23 million of that amount. Furthermore, the Relative Strength Index (RSI) stood at 69.02 as of the 14th, indicating an overbought condition, which also encouraged profit-taking and panic selling.

Experts analyze that Bitcoin's short-term direction depends on whether the weekly opening support line of $78,500 is defended. If this level is successfully held, buying pressure could re-accumulate, allowing Bitcoin to retest the $82,800 resistance. However, if the initial defense line breaks, there is also a possibility of further decline to the $76,000 to $78,000 range, where the 200-day exponential moving average is located.

A key variable that will determine the future market trend is the US Consumer Price Index (CPI) data, scheduled to be released on May 12. As macroeconomic direction is set by inflation data, investors are expected to maintain a cautious stance for the time being. Additionally, whether open interest and funding rates stabilize, and whether the accumulated leverage bubble in the market sufficiently dissipates, will also be important points to watch.

The media evaluated this decline as a typical period of consolidation, driven by a combination of geopolitical headwinds and adjustments in the derivatives market, rather than a collapse of fundamentals. In particular, inflows into Bitcoin spot Exchange Traded Funds (ETFs) remain robust, and how effectively these spot funds' buying pressure absorbs the selling pressure flooding the market will be a key factor for a future trend reversal.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*