Encryption Asset Weekly: Geopolitical Risks Intensify, BTC Faces Downward Pressure

This week, the cryptocurrency market has faced multiple tests, influenced by factors such as institutional capital support, heightened caution in derivatives, and a sudden increase in geopolitical risks. BTC fluctuated in the range of $102,000 to $109,000, briefly declining over the weekend due to the situation in the Middle East before partially recovering.

Despite the stable structural forces within the market, escalating geopolitical conflicts have led short-term traders to price BTC downwards. In the current situation, the future trend of BTC will highly depend on the development of the Middle East conflict. If the situation gradually eases, BTC is expected to return to around $105,000; however, if the conflict continues to escalate, it may face greater downward pressure.

Policies and Macroeconomic Environment

The situation in the Middle East has deteriorated sharply this week. Israel has conducted airstrikes on targets within Iran, and Iran has retaliated with missiles and drones. The United States has since openly stated that it is considering military options, escalating the situation to a new high.

The most striking aspect is the precise strike operation by the United States on Iran's nuclear facilities. This move has sparked strong reactions in the international community, with the United Nations calling on all parties to exercise restraint, and the European Union and the UK condemning Iran's nuclear program while urging a peaceful resolution. Iran, on the other hand, has threatened to take reciprocal measures and even hinted at possibly blocking the Strait of Hormuz.

These developments have pushed global financial markets into a typical risk-averse mode, with rising crude oil prices, declining U.S. Treasury yields, a pullback in tech stocks, and a surge in demand for precious metals. If the conflict continues to escalate, particularly involving energy transport routes, it could trigger a significant repricing of global assets.

Encryption Market Dynamics

The performance of encryption assets this week has been affected by multiple factors. BTC continues to fluctuate in a high range, experiencing a brief decline due to geopolitical situations over the weekend, followed by a slight rebound.

At the beginning of the week, the market's expectation that the situation in the Middle East was "controllable" led to a slight increase, with BTC briefly reaching 109,000 USD. The continuous inflow of institutional funds has become an important support for the price. However, as the situation deteriorated, market sentiment shifted to cautious.

On Friday, ETH experienced a large-scale net outflow, triggering a chain reaction that led to a pullback in other high-risk assets. Over the weekend, the U.S. strikes on Iran's nuclear facilities further exacerbated market volatility, with BTC briefly falling below $100,000, but its relative performance remained relatively strong. In contrast, high-risk assets like ETH saw larger declines, reflecting the fragility of market liquidity.

From a technical perspective, BTC has temporarily fallen below the first ascending trend line but is still operating within the $90,000 to $110,000 range. The internal structure of the market and funding support are basically stable, and this week's decline is mainly due to panic caused by geopolitical issues. If the situation continues to deteriorate, it may test the key support levels of $100,000 and $90,000.

Capital Flow Analysis

Recently, the capital flow has shown a divergent trend. The inflow of funds through stablecoin channels has weakened, while the inflow of funds into BTC spot ETFs remains relatively stable. This week, the net inflow into BTC spot ETFs was 1.022 billion USD, a decrease from last week but still maintaining a high level. However, if the geopolitical situation continues to affect the US stock market, this inflow of funds may face challenges.

In terms of stablecoins, there was a net outflow of $132 million this week, in stark contrast to the $1.273 billion inflow last week. The ETH spot ETF saw an inflow of $40.77 million this week, but experienced a single-day outflow of over $100 million on Friday. This change in capital flow could put pressure on high-risk assets.

Market Structure Changes

In the current complex environment, the ability of BTC prices to remain high is mainly attributed to institutional allocations and structural forces within the market. Long-term holders continue to increase their positions, while short-term speculators reduce theirs. The stock of BTC on exchanges continues to decline, but the outflow has narrowed significantly due to panic selling and a decrease in speculative enthusiasm.

The data indicates that long-term investors still have strong confidence in BTC, but the enthusiasm for short-term trading has明显降温. The short-term pricing power of BTC mainly depends on the short-term traders in the market and the flow of ETF funds, both of which are currently showing signs of cooling.

Future Outlook

The basic logic of BTC's long-term price trend has not changed, unless the conflict in the Middle East escalates into a regional war with direct U.S. involvement. If the situation quickly eases, BTC is expected to return to around $105,000; however, if it continues to deteriorate, it may fall below $100,000 and even test the $90,000 support (which is less likely).

According to eMerge Engine data, the EMC BTC cycle indicator is currently 0.625, in an upward phase. However, geopolitical risks will be the key factors influencing market trends in the short term.