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(Kitco News) – The cryptocurrency market traded lower on Monday after the surprise weekend attack on Israel by Hamas plunged financial markets into chaos, with investors scrambling to de-risk amid a further deterioration in the stability of global financial markets.
Stocks opened the day lower but reversed course in the afternoon as dip buyers who have experience with the short-lived effect that geopolitical events have on markets took the opportunity to acquire assets at a discount.
Oil spiked as much as 5% after the attack amid speculation that key crude-producing countries in the region could be dragged into the conflict. Analysts warned that a sustained rally in oil could add to the inflationary pressures already facing the economy, further raising the likelihood of another interest rate hike by the Federal Reserve.
At the close of markets, the S&P, Dow, and Nasdaq all finished in the green, up 0.63%, 0.59%, and 0.39%, respectively.
Data provided by TradingView shows that Bitcoin (BTC) also fell under pressure in early trading on Monday, dropping to a low of $27,275 in the afternoon before bulls pushed it back above $27,600, a decrease of 1% on the 24-hour chart.
BTC/USD Chart by TradingView
The weakness for crypto first appeared in the futures market, with “October Bitcoin futures prices trading lower in early U.S. trading Monday,” according to Kitco senior technical analyst Jim Wyckoff.
Bitcoin futures 1-day chart. Source: Kitco
“However, the bulls still have the near-term technical advantage and are keeping alive a price uptrend in place on the daily chart,” Wyckoff said. “The path of least resistance for prices remains sideways to higher in the near term.”
According to analysts at MN Trading, the impact that the conflict in Israel will have on financial markets “will largely depend on whether the conflict escalates in the broader Middle East region.”
“Iran, a major oil producer and supporter of Hamas, adds another layer of complexity,” they said. “Geopolitical crises in the Middle East have historically led to rising oil prices and falling stock prices. Much hinges on whether this crisis turns out to be a short-term flare-up or something more significant, like a war between Israel and Iran.”
While it’s unknown how things will play out in the days ahead, “This war will introduce more uncertainty to the markets, with inflation and growth taking a backseat while geopolitical risks come to the forefront,” the analysts said. “We could expect increased volatility, with short-term fixed income emerging as a safe haven, while cyclical sectors will be in the spotlight.”
Looking at the chart for gold, the analysts noted that, “Gold often performs well during times of geopolitical unrest, which is slowly starting to be mentioned currently.”
“We can see that gold has immediately made a strong bounce in the daily order block,” they said, adding that they “expect this bounce to continue towards 1880, and possibly 1920.”
Gold (XAUUSD) 1-day chart. Source: MN Trading
“If the situation in the Middle East worsens and gold remains strong during this period, higher prices are certainly possible,” the analysts said.
Moving to Bitcoin, they noted that, “When we see or expect that gold is going to perform well, we almost always keep a close eye on BTC because BTC should move in line with gold during times of uncertainty.”
BTC/USD 1-day chart. Source: MN Trading
“Looking at the chart, we can assume that BTC will indeed move to higher prices,” they said. “BTC has managed to bounce strongly off the old range high for the second time and is heading towards the weekly order block located at $28.5k-30.4k. Slightly higher, at $31.8k, there is an important liquidity level. Considering the current structure of BTC, [we] see no reason to trade lower as long as BTC remains above the old range high.”
MN Trading founder Michaël van de Poppe posted the following tweet near the market close on Monday suggesting that Bitcoin’s climb to $30,000 “is going to start from here.”
The vast majority of altcoins traded lower to start the week, with less than a dozen tokens in the top 200 recording gains for the day.
Daily cryptocurrency market performance. Source: Coin360
Liquity (LQY), Loom Network (LOOM), and Storj (STORJ) were the only notable gainers with increases of 18.58%, 12.54%, and 7.77%, respectively. Moonbeam (GLMR) led the losers with a decline of 10%, followed by a 9.7% loss for 0x Protocol (ZRX), and a 9.2% decline for Magic (MAGIC).
The overall cryptocurrency market cap now stands at $1.07 trillion, and Bitcoin’s dominance rate is 50.3%.