The US intervenes in the Israel-Palestine conflict, and geopolitical tensions intensify, driving BTC down in price, follow the 100,000 support (06.16~06.22)

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This week, crypto assets experienced a threefold intertwining of "institutional capital support, rising derivative caution, and a sudden amplification of geopolitical risks."

BTC continues to test the range of $102,000 to $109,000, and experienced a brief panic drop over the weekend due to the U.S. launching an attack on Iran's nuclear facilities, followed by some recovery.

The structural forces within the cryptocurrency market remain intact, serving as an important support for stable prices; however, due to the intensified geopolitical conflicts, short-term traders have marked down BTC.

Subsequently, under stable internal conditions, the future trend of BTC entirely depends on whether the Israel-Iran conflict will continue to escalate, such as if Iran directly supplies U.S. military bases and ships, or even blockades the Strait of Hormuz. If the conflict gradually resumes, BTC is highly likely to return to the level of 105,000 dollars.

Policies, Macroeconomic Finance and Economic Data

This week's conflict between Israel and Hamas has escalated in a spiraling manner.

From June 16 to 18, Israel continued to launch "surgical" airstrikes targeting missile sites and command centers of Shiite militias within Iran; Iran subsequently retaliated with ballistic missiles and drones, raising the intensity of regional firepower and escalating the battlefield temperature. The market quickly entered a defensive mode: Brent crude oil surged nearly 7% over the week, briefly breaking through the $78 mark; gold also rose in tandem, reaching a peak of $33,452.37 per ounce.

On June 19, the White House publicly stated for the first time that it is "evaluating military options," marking a critical point in the United States' shift from behind-the-scenes coordination to open intervention. On the day the news was announced, Brent crude oil futures rose again by 2.8%, reaching $78.85, a five-month high; the VIX volatility index increased, while U.S. Treasury yields experienced a safe-haven decline.

A brief easing occurred on June 20th as the market speculated that Washington might conclude with additional sanctions rather than military action, resulting in a slight pullback in oil prices and a technical rebound in global stock indices.

However, just a day later, this optimism about "sanction alternative strikes" was completely shattered: U.S. President Trump ordered, in the early morning of June 21, Eastern time, three B-2 stealth bombers to carry out precision bombings on Iran's Fordow, Natanz, and Isfahan uranium enrichment facilities with GBU-57 "Massive Ordnance Penetrator." In a televised address, Trump claimed that "key core capabilities have been reset to zero," implying that if Iran is willing to negotiate, the actions could come to a halt.

This move immediately triggered intense diplomatic turmoil. UN Secretary-General Guterres described the situation as "extremely precarious," while the EU and the UK condemned Iran's nuclear ambitions and urged all parties to exercise restraint. Iran's Foreign Minister accused the United States of "openly violating the UN Charter," vowing to take "proportional or asymmetric retaliation," and stated that selective blockades in the Strait of Hormuz could not be ruled out. Subsequently, the Iranian parliament passed a resolution allowing for the closure of the Strait of Hormuz (which would affect 20% of global oil exports), with the final decision to be made by Iran's Supreme National Security Council.

Due to the airstrike occurring during the weekend market closure, the pricing of mainstream financial markets is yet to be revealed on Monday, but derivatives and offshore trading have already given forward-looking signals: energy and military industry ETFs are bidding higher in the night session; CME crude oil options OI has significantly increased in volume at the execution price segment above $90; meanwhile, high-risk assets such as cryptocurrencies have seen selling pressure first, with BTC down about 1.14% and ETH dropping more than 2.96% during the trading session.

In last week's report, we mentioned that the short-term BTC trend depends on the developments of "geopolitical conflicts." If the conflict escalates or intensifies, risk assets including BTC will likely remain volatile or even be priced downwards; if the conflict eases, equity assets may gradually recover their losses.

This week's direct intervention by the United States has escalated the conflict, pushing BTC down 4.36% to $4602.38 for the week. If Iran's retaliatory actions involve supplies to U.S. military bases or "blockading" the Strait of Hormuz, it will further impact the downward pricing of global U.S. stocks and crypto assets.

This week's events have pushed the situation in the Middle East into a gray area between "controllable confrontation" and "proxy escalation", with the market entering a typical "oil inflation - U.S. Treasury safe-haven - tech pullback - precious metals favored" pattern. If Iran's retaliation is constrained by domestic political and military capabilities in the coming weeks, the market may digest the situation amid high volatility; however, if the conflict further spills over to maritime energy routes or U.S. military bases, the magnitude and pace of global asset repricing will significantly intensify.

Historical data shows that BTC often retraces in advance at the beginning of geopolitical crises, and then recovers with a weak negative correlation to gold; however, if the conflict evolves into a dual squeeze on global liquidity and funding costs, the sensitivity of Bitcoin and Ethereum will be significantly amplified.

Crypto Market

This week, the crypto assets experienced a threefold intertwining of "institutional capital support, rising caution in derivatives, and a sudden amplification of geopolitical risks." BTC continued to test the range of $102,000 to $109,000 and experienced a brief panic drop over the weekend due to the U.S. attack on Iranian nuclear facilities, followed by some recovery.

At the beginning of the week, the market's expectation of the "controllability" of the Israel-Hamas conflict led to a slight recovery: BTC rebounded to a maximum of 109,000 USD, with Bitcoin spot ETFs seeing continuous net inflows for eight trading days. This funding data provided key support for prices amidst macro noise. In the context of cooling on-site funds, institutional buying power has become the main force maintaining BTC prices above 100,000 USD.

Subsequently, the FOMC results announced on June 19, which indicated "no change + dot plot slowdown," did not disrupt the fluctuation rhythm of BTC, but the futures market shows that the hedging scale is increasing.

Data after the Friday trading session showed that ETH ETF experienced the largest single-day net outflow since June (11.3 million USD), leading to a series of deleveraging as institutions reduced their positions. The USD quote for ETH dropped sharply to 2,372 USD, with trading volume increasing, which also caused high beta assets like SOL and DOGE to withdraw simultaneously.

On June 20, during the US market session, a round of high leverage squeeze caused BTC to quickly drop below $103,000, with more than 90% being long positions; ETH, SOL, and others fell by as much as 6-9%. This "seconds kill" event confirmed the fragility of excessive leverage on the derivatives side and marked the first large-scale systemic liquidation in the market since the rapid rise in May.

The weekend risk peak occurred in the early hours of June 21-22 Eastern Time: News of the U.S. B-2 bombers precision striking three uranium enrichment facilities in Iran broke the weekend liquidity vacuum. As the only major asset traded in real-time globally 24/7, the crypto market saw BTC temporarily drop below $100,000, but it closed down -1.14%, showing relatively strong performance. However, ETH, after a nearly 10% decline over two consecutive days, dropped again by 2.96%, indicating that the liquidity of high-risk assets is very fragile.

From a technical indicator perspective, the geopolitical conflict has caused BTC to temporarily fall below the first upward trend line, but it is still operating within the range of $90,000 to $110,000. We believe that the structured tension in the market remains intact, and the funding support has not changed much. The downward pricing of BTC this week is due to the panic caused by the escalation of geopolitical conflict. If the conflict escalates further, this impact will gradually dissipate; however, if the conflict continues to escalate, it will test the key support levels of $100,000 and $90,000.

Fund In and Out

After the significant rebound in April and May, the inflow of funds has shown differentiation. The capital in stablecoin channels has started to weaken, while the capital in BTC Spot ETF channels remains relatively strong and stable.

This week, the BTC Spot ETF channel saw an inflow of $1.022 billion, a significant decrease from last week's $1.384 billion, but still maintaining a high level. However, this data may face considerable challenges next week; if geopolitical conflicts continue to cool the US stock market, the BTC Spot ETF channel funds are likely to struggle to show an independent trend.

Cryptocurrency Market Capital Inflow Statistics (Weekly)

Stablecoin channels saw an inflow of 1.273 billion last week, but this week shifted to an outflow of 132 million. This rapid cooling is consistent with the trends we have observed in the derivatives and lending markets.

This week, ETH Spot saw an inflow of 40.77 million USD, with the inflow scale shrinking in the first half of the week, and by Friday, it turned into an outflow of over 100 million USD. The reduction in ETH inflow may put pressure on high β assets. A flash crash could cause significant damage to the market.

Selling Pressure and Selling

In the context of delayed interest rate cuts and rising geopolitical tensions, the BTC price remains high between $10 and $12, with decisive forces coming from institutional allocations and structural tensions within the market.

This week, long positions continued to increase by 28,920 coins, while short positions continued to decrease by 24,650 coins, and the inventory in centralized exchanges continued to decline. Due to panic selling and weakened speculative enthusiasm, the outflow scale from exchanges significantly decreased to 1,555.9 coins this week.

The above data may indicate that long-term holders' confidence in BTC is continuing to strengthen, while the enthusiasm of short-term traders is cooling off faster. The short-term pricing power of BTC is jointly determined by on-site short-term traders and funds from the BTC Spot ETF channel. Currently, both are showing signs of cooling. If the Israel-Palestine conflict is resolved quickly, BTC may turn from danger to safety and return to the 105000 level. If it worsens, it is highly likely to fall below the 100000 level, and even test the 90000 level (though this probability is lower).

EMC Labs believes that the logic of BTC's medium to long-term price trends has not changed, unless the Israel-Hamas conflict evolves into a regional war involving U.S. intervention.

Cycle Indicator

According to eMerge Engine, the EMC BTC Cycle Metrics indicator is 0.625, which is in an upward phase.

EMC Labs

EMC Labs, founded by crypto asset investors and data scientists in April 2023, focuses on research in the blockchain industry and investments in the Crypto secondary market. With industry foresight, insights, and data mining as its core competitiveness, it is committed to participating in the thriving blockchain industry through research and investment, promoting the well-being of humanity through blockchain and crypto assets.

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