Bitcoin started the week on a bullish note, with Sunday night futures prices opening above the $66k level on the CME Futures exchange. However, geopolitical tailwinds caused bitcoin to head towards the downside by the middle of the week.

Both bitcoin and most risk-on assets reacted negatively to an Iranian ballistic strike on Israel in the Middle East, a region that has triggered significant price speculation among crypto, equity, and forex traders over the past several months.

When Iran launched their attack on Tuesday morning during US market hours, it caused a sharp decline in bitcoin’s price. Bitcoin fell from the $64k level all the way down to $60k support in a matter of hours, as the market responded to the severity of the attack. As a result, bitcoin declined over 5% but managed to claw back some of the losses by the daily close, ending the day with a -3% loss.

Long Liquidations Triggered

Tuesday’s volatility triggered a cascade of long liquidations for crypto traders, with over $450 million in long positions liquidated across major futures exchanges.

This marked the largest liquidation event in about two months, with the last major liquidation occurring on August 4th, when over $700 million in long positions were wiped out.

Bitcoin Dominance Reigns Supreme During Geo-Political Turmoil

A notable trend during times of geopolitical uncertainty is the shift toward bitcoin as a safe haven, often at the expense of altcoins.

On the left side of the chart above is bitcoin dominance, which spiked by 1.5% during Tuesday’s news-driven price action. On the right is USD Tether dominance, which also saw a spike.

This combination indicates that money is flowing into the relative safety of bitcoin and the stablecoin tether, which is bearish for altcoins. It also highlights bitcoin’s role as a safe-haven asset during risk-off periods.

Presidential Betting Odds Influencing Crypto Prices?

One data metric we’ve been tracking in this newsletter over the past few months is the political betting odds for the upcoming US presidential election, which is now just one month away. As previously discussed, a Trump administration victory could be bullish for the crypto sector, given his pro-crypto stance, proposed industry regulations, and the potential for a bitcoin strategic reserve bill if he wins.

To start the week, Harris held a 3.5-point lead over Trump, but by Friday, that lead had narrowed to less than 1 point, suggesting that betting markets now see the election as essentially a toss-up.

This political uncertainty may have contributed to bitcoin’s ability to hold above the critical $60,000 support level following Tuesday’s geopolitical events, and its recovery by Friday with a 2.32% gain. However, bitcoin still ended the week down 5% (CME Futures), likely due to Tuesday’s broad market sell-off following the Middle East developments.

Spot ETF Flows Update

It was a net-negative week for ETF flows. Monday started off strong with $61 million in inflows, but those gains were wiped out during Tuesday’s sell-off, which saw over $240 million in outflows. Friday brought a modest net inflow of $26 million, but it wasn’t enough to offset the week’s earlier losses. Total net assets dropped to $57.73 billion, down from last Friday’s peak of $61.21 billion across the top ETF issuers.

The largest inflow of the week occurred on Monday for Blackrock’s IBIT fund, with $72.2 million in inflows, while Fidelity’s FBTC fund saw the largest outflows on Tuesday, with nearly $145 million exiting the ETF.

While October is historically a bullish month for bitcoin based on seasonality data, the outcome of this month remains uncertain, particularly in light of the evolving situation in the Middle East and potential shifts in the political betting odds marketplace.

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