Bitcoin rally at risk below $73K as Iran tensions shake sentiment

Bitcoin price failed to sustain a breakout beyond $73,000 as investors are once again concerned that global tensions and a wobbly truce with Iran threaten to reverse Bitcoin’s recent gains in the United States.

While reports that Iran may use Bitcoin and other digital assets as a payment method for cargo ships passing through the Strait of Hormuz helped spark a rally earlier, the mood changed as concerns grew that the fragile truce between the US and Iran could fall apart.

Iranian parliamentary speaker and former Islamic Revolutionary Guard Corps (IRGC) general Mohammad Bagher Ghalibaf, who is a leading voice within the regime, spoke out against Israel's continued campaign in Lebanon.

He warned that any illegal entry into their space or the denial of uranium enrichment would violate the ceasefire and lead to more conflict.

Crude oil prices jumped back to $97 per barrel, which usually hurts risk markets because high energy costs make investors nervous about buying risky assets like crypto.

However, the main worry came from inflation data shared by the US Bureau of Economic Analysis on Thursday.

It showed that the headline Personal Consumption Expenditures (PCE) index rose by 0.4%, while core inflation remained elevated, indicating price pressures are easing only gradually and still above the Federal Reserve’s target.

At the same time, the fourth quarter gross domestic product was revised down to a 0.5% annualized rate, showing that the economy is barely growing.

Although the higher odds of economic stagnation sometimes make investors believe the government will be less risk-averse and forced to inject liquidity into the market, it has caused fear instead.

Reduced confidence in the plan to avert a recession has led to a weaker US dollar when compared to a basket of foreign currencies.

Bitcoin seems to be struggling to find a clear direction as it is caught between expectations regarding the war and the mounting pressure of weak US macroeconomic data, leaving investors torn between the fear of geopolitical conflict and the risk of a looming economic crash.

Bitcoin needs to clear upside liquidity

At the time of writing, Bitcoin price had reclaimed $72,000, but an estimated $6 billion in leveraged short positions concentrated between $72,200 and $73,500 could create a massive wall of selling that keeps the price from climbing higher. See below.

Bitcoin liquidation heatmap. Source: Coinglass.

Yesterday’s rally wiped out about $427 million in these bets, but the remaining wall of sell orders acted as a huge supply overhang.

This means there are still too many people waiting to sell at those higher prices, which stops the price from going up.

From here on, Bitcoin must first clear this heavy selling pressure and stay above $73,000 before it can gain the momentum needed to reach new record highs.

The level is also very important for investor confidence, because if Bitcoin keeps failing to break through, traders might get discouraged and start selling, pushing the price back down toward $68,000.