Bitcoin collapses below $80,000 due to Iran-driven woes, will it defend support and rebound?

▲ Strait of Hormuz, Bitcoin/ChatGPT generated image ©

As Iran abruptly rejected the US peace proposal, geopolitical tensions in the Middle East escalated again, cooling down the market as the leading cryptocurrency, Bitcoin (BTC), which had been on an upward trajectory, slipped below $80,000. While a short-term shock occurred due to the cascading liquidation of excessively accumulated leveraged positions, the fundamental demand in the spot market remains solid, drawing attention to whether the support line will be defended in the future.

According to the cryptocurrency market data aggregator CoinMarketCap on May 8 (local time), Bitcoin recorded a 1.89% drop over the past 24 hours, reaching $79,888.67, effectively relinquishing all of this week's gains. The primary cause of this sharp decline is the widespread risk-off sentiment following news of Iran's rejection of the peace proposal. The collapse of settlement expectations and fears that US President Donald Trump might escalate the response, including military action, have gripped the cryptocurrency market.

Overheated leverage in the derivatives market also acted as a catalyst, amplifying the decline. According to CoinGlass data, a total of $89.75 million worth of positions were forcibly liquidated in the Bitcoin market over the past 24 hours, with long positions expecting an increase accounting for $79.23 million of that. Additionally, the Relative Strength Index (RSI) stood at 69.02 on the 14th, indicating an overbought condition, which further encouraged profit-taking and panic selling.

Experts analyze that Bitcoin's short-term direction depends on whether the weekly opening support level of $78,500 is defended. If this level is successfully held, buying pressure could re-accumulate, potentially retesting the $82,800 resistance level. However, if the initial defense line breaks, there is also a possibility of further decline to the $76,000 to $78,000 range, where the 200-day exponential moving average is located.

A key variable that will determine the future direction of the market is the US Consumer Price Index (CPI) data, scheduled to be released on May 12. As macroeconomic trends are shaped by inflation data, investors are expected to maintain a cautious stance for the time being. Furthermore, whether open interest and funding rates stabilize, indicating that accumulated leverage bubbles in the market have sufficiently cleared, is also an important observation point.

The media assessed this decline as a typical period of consolidation, driven by geopolitical woes and adjustments in the derivatives market, rather than a collapse of fundamentals. Particularly, capital inflows into Bitcoin spot Exchange Traded Funds (ETFs) remain robust, making the effectiveness of these spot funds' buying power in absorbing the selling pressure in the market a key factor for a future trend reversal.

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