Bitcoin Crumbles to $60K, Giving Up Most Post-Fed Rate Cut Gains

Cryptocurrencies tumbled during the Tuesday U.S. session as headlines of escalating tension in the Middle East prompted investors to flee risk assets.

Bitcoin (BTC), the largest digital asset by market cap, climbed to around $64,000 during European hours before quickly tumbling to $62,500 as Axios reported the White House as having indications Iran was prepping an imminent ballistic missile attack against Israel. Another leg down followed to $61,000 when the Israel Defense Forces (IDF) said that Iran launched missiles at the country.

A late-afternoon move lower brought bitcoin’s price to just above the $60,000 level, now having given up nearly all of the gains seen after the U.S. Federal Reserve sparked a big rally with a 50 basis point interest rate cut in mid-September.

The broad-market digital asset benchmark CoinDesk 20 Index was down nearly 5% over the same period, with ether (ETH) faring a bit better with a 3.8% loss at just above $2,500. Altcoin majors suffered even deeper pullbacks, as Solana (SOL), Polkadot (DOT), Avalanche (AVAX), Uniswap (UNI), Render (RNDR), Polygon POL and Hedera (HBAR) endured 5%-10% declines.

Key U.S. stock indexes opened the day lower, with the S&P 500 and the tech-heavy Nasdaq trading 1% and 1.7% lower, respectively, in the later hours of the session. Gold jumped 1% to $2,690 per ounce and neared its record high just above $2,700 set last week, while WTI crude oil surged 3% to over $70 per barrel.

The diverging price action of gold and bitcoin highlighted the leading digital asset’s high correlation with risk-on assets like stocks, not to mention gold fulfilling its traditional role as a safe-haven asset. The 30-day rolling correlation between BTC and the S&P 500 is now approaching yearly highs at 0.62, K33 Research noted in a Tuesday report.

Bitcoin’s Tuesday drop was also reminiscent of the price action at the start of this current Middle East tumult nearly one year ago today, not to mention similar instances earlier this year in April and July when crypto assets knee-jerked lower in reaction to headlines from that region.

Swissblock analysts reiterated its bullish outlook for digital assets in a Telegram market update, saying that “‘war news’ like those pressing on markets today rarely turn out to have a sustainable negative impact on asset prices.”

“We stay bullish,” they added.

UPDATE (Oct. 10, 17:55 UTC): Updates story with latest price action. Adds analyst comment.

UPDATE (Oct. 10, 20:45 UTC): Updates story with latest price action.