The crypto market loses capitalization amid geopolitical risks

Amid rising geopolitical tensions and waning investor interest, the price of bitcoin has taken another dip. After briefly climbing to $109,000, the leading cryptocurrency dropped over $5,000 in a single day, settling near the $103,800 mark. This brings the price back to levels seen last week during the initial escalation of the Middle East conflict.

Investors shift from optimism to caution

Just a day earlier, many traders remained hopeful about bitcoin’s continued growth. However, sentiment has turned sharply, moving from bullish to neutral—and in some cases, cautious. Selling pressure has increased, and crypto traders have begun actively hedging their positions in anticipation of further declines.

On Deribit, the largest options trading platform for crypto, there has been a notable surge in demand for put options—contracts that allow traders to sell an asset at a predetermined price. Trading volume for these instruments more than doubled that of call options. The highest number of open positions was in puts protecting against a drop in bitcoin's price to $100,000.

Geopolitics and liquidations add to the pressure

Worsening global instability, expectations around the U.S. Federal Reserve’s interest rate policy, and strained trade relations between the U.S. and China have created an unfriendly environment for risk assets. In just 24 hours, over 140,000 traders saw their positions forcibly liquidated by crypto exchanges, with total losses estimated at around $383 million. Of that amount, $86 million was tied to bitcoin, and $115 million to Ethereum.

Liquidations typically occur during periods of high volatility when leveraged positions become too risky. In simple terms, if a trader borrows money to open a larger position and the price moves against them, the exchange closes the position to recover its loan. This becomes especially common during turbulent times when the market gives little time to react.

Key signs of the current downturn

In the current environment, more investors are leaning toward conservative strategies. The following are some of the key indicators showing a cooling interest in crypto:

• A surge in short-term put option volume
• A drop in the crypto fear and greed index from 68 to 52 points
• Increased liquidations of leveraged positions
• Declining prices across most top-10 cryptocurrencies
• Capital moving into less volatile assets like the US dollar and government bonds

These signals suggest that the market isn’t just correcting—it’s entering a phase of risk reassessment. Many investors are not yet ready to increase their exposure and prefer to wait it out.

What’s happening with other cryptocurrencies

Ethereum is trading around $2,500, down roughly 12% over the past week. Bitcoin, while faring slightly better with a 4.5% decline, remains under pressure. Among other top-10 coins, Cardano saw the biggest drop, falling 3.2%.

The total market capitalization of the crypto sector declined by 0.6% and now stands at $3.26 trillion. Interestingly, while most major assets fell, the Aerodrome Finance (AERO) token rose 13%, while Story (IP) was the day’s biggest loser, dropping 17%.

Uncertainty ahead

According to analysts, if geopolitical tensions continue to escalate and regulators tighten monetary policy further, the crypto market could enter a prolonged correction phase. In such a scenario, bitcoin may lose its appeal as «digital gold» and increasingly be treated as a speculative asset that investors abandon at the first sign of trouble.

Still, it’s too early to declare a crash. The market remains in a neutral zone, and much will depend on how global events unfold in the coming days and weeks.