Why is Bitcoin price tanking today?

Bitcoin price fell nearly 4% on Monday as investors remain in fear over the latest military strikes in Iran over the country’s mining operations and a looming CME gap.

According to data from crypto.news, Bitcoin (BTC) price tanked 3.7% from around $67,767 to an intraday low of $65,226 on Monday, March 2, morning Asian time.

The bellwether’s sharp drop followed after it rallied nearly 7% on Sunday after reports emerged that the U.S. had successfully targeted Iran’s Supreme Leader. Traders inferred that such a definitive blow could mark the end of the ongoing military hostilities between the two countries, assuming that the removal of top leadership might lead to a swift de-escalation of the conflict.

While the market still awaited more cues on how the geopolitical succession and potential power vacuum in Tehran may play out, the sudden drop in BTC price led to the wipeout of several highly leveraged long positions, which in turn triggered a cascading effect of forced selling across exchanges.

Data from CoinGlass shows that over the past 24 hours, over $121 million of long positions were liquidated in compared to the $48 million from traders who had maintained a bearish positioning.

Bitcoin price drop today can largely be attributed to investors’ concerns around Iranian Bitcoin mining operations after the latest round of missile strikes launched by the United States on several key Iranian military facilities.

Investors remain wary that the military escalation in the zone could impact the power grid of the nation, which in turn could paralyze miners in the region who had been utilizing subsidized electricity from the government to run operations while paying their duties with the assets generated.

A drop in mining throughput could force these companies to sell off their assets on exchanges to cover operational costs and losses, and hence lead to more downside risk for BTC price.

Inflation fears over the situation at Hormuz

Concerns intensified following the Iranian government’s announcement that it would close the Strait of Hormuz, a critical maritime link between the Persian Gulf and the Gulf of Oman.

The Strait of Hormuz has become a holding ground for oil shipments this weekend, with shipping traffic grinding to a halt as Iran launched counter-strikes against U.S. and Israeli interests. 

Subsequent rise in oil prices and other commodities raised concerns about a renewed energy-driven inflation impulse in the U.S., which likely reduced risk-on sentiment of traders.

Against this backdrop, traders have once again started rotating capital to safe-haven assets like gold as they brace for further volatility in the crypto space.

CME gap on the downside

Bitcoin price also fell as investors remained uncertain over how the U.S. markets would open. Meanwhile, a CME gap has formed around $65,880.

CME gaps occur when the market price at the Monday opening differs from the Friday closing price over the weekend. Historically, Bitcoin price has moved to fill these gaps most of the time.