Oil Shock Hits Crypto as Bitcoin Falls Below $84,000

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When oil goes up, Bitcoin goes down: After Iran stepped up its attacks on tankers in the Strait of Hormuz, Bitcoin just slipped below $84,000 and is trading at about €74,800, according to CoinGecko, down about 2.4 percent over 24 hours. Brent crude climbed above $101 a barrel, while Treasury yields and the dollar rose. As so often, smaller crypto assets were hit harder than Bitcoin.

Altcoins Fall Twice as Hard

DeFi tokens lost almost 6 percent over 24 hours, according to CoinDesk, and the memecoin index fell about 5 percent. Ether dropped about 4.5 percent to roughly €2,300 ($2,580), Cardano lost more than 8 percent and Uniswap as much as 10 percent.

Ethereum’s layer-2 networks took a particularly heavy beating. The trigger was news that Abstract, the network behind Pudgy Penguins, has become the second layer-2 network to shut down within a week. Optimism (OP) lost about 10 percent, Mantle (MNT) nearly 10 percent and Arbitrum (ARB) about 7 percent. The Pudgy Penguins token (PENGU) fell more than 7 percent.

Only a few tokens escaped the downturn. The Sandbox (SAND) rose about 9 percent after jumping 37 percent last week, bringing its weekly gain to almost 60 percent. Stacks (STX), a layer-2 network for Bitcoin, gained about 4 percent.

Liquidations More Than Triple

As in the crypto hangover after the rally almost two weeks ago, the derivatives market amplified the decline. According to CoinGlass, liquidations rose 235 percent over 24 hours to $547 million (about €489 million). Ether positions accounted for $174 million of that.

Traders remain cautious. Funding rates for Bitcoin and Ether perpetual futures have turned slightly negative, meaning short sellers are paying to keep their bets on falling prices open. Open interest in Bitcoin futures has recovered to 660,000 BTC from an 11-month low of 626,000 BTC at the end of September, but it remains far below this year’s record of 800,000 BTC. There is little sign of a return of leveraged bets on rising prices.

ETF Investors Keep Buying

There is one bright spot: U.S. spot Bitcoin ETFs took in $119 million (about €106 million) on Tuesday, according to SoSoValue, their fourth day of inflows in the past five sessions. Options traders are also still betting on gains: On Deribit, call options with strike prices above $80,000 dominate trading volume.

The market is now waiting for the minutes of the Federal Reserve’s September meeting, when it raised rates by a quarter point. Weaker jobs data has recently made another increase in October less likely. What matters is whether the minutes sound patient or still point to one more hike before year-end, said Dan Khus, chief analyst at LVRG Research. Because of the Iran war, however, oil prices remain a risk for inflation, and with it for interest rates and risk assets like cryptocurrencies.

The Largest Crypto Assets at a Glance

The table below shows the largest crypto assets by market capitalization (excluding stablecoins and tokenized loans), according to CoinGecko, with prices in euros.