Bitcoin, Ethereum Drop as Iran Airstrikes Trigger Crypto Market Sell-Off

Crypto markets extended losses on Wednesday as renewed military escalation between the United States and Iran fueled a broad risk-off mood across global financial markets. The CoinDesk 20 Index fell 2.9% since midnight UTC, with nearly every tracked digital asset trading lower.

The decline followed fresh airstrikes in Iran and comments from U.S. President Donald Trump, who told NATO leaders that the ceasefire was "over" and described negotiations with Iran as a "waste of time," even as diplomatic discussions reportedly continue. The U.S. Central Command said it targeted more than 60 Islamic Revolutionary Guard Corps boats to prevent disruptions to international shipping, while Iran responded with attacks on Kuwait and Bahrain.

The geopolitical tensions strengthened the U.S. Dollar Index (DXY), raising concerns about inflation and weighing on risk assets. Bitcoin (BTC) dropped more than 2% to around $62,000, while Ether (ETH) also declined by over 2%. Altcoins suffered steeper losses, with Jupiter (JUP), Ether.fi (ETHFI), and Pump (PUMP) each falling more than 5%. U.S. stock futures also weakened, with both the Nasdaq 100 and S&P 500 futures sliding as much as 1.5%.

Despite Bitcoin's decline, derivatives data suggests traders are not aggressively betting against the cryptocurrency. Bitcoin futures open interest eased to 730,000 BTC from more than 740,000 BTC a day earlier. Ether, however, showed weaker positioning as futures open interest remained near 13.95 million ETH while liquidations exceeded $90 million. Bitcoin liquidations totaled just over $100 million.

Market sentiment remained bearish across major cryptocurrencies, with negative open interest-adjusted cumulative volume delta indicating that aggressive market selling is driving prices. Demand for downside protection also increased, as Bitcoin and Ether implied volatility indexes climbed for a second straight day. On Deribit, the one-week options skew shifted further toward put options, reflecting stronger hedging activity, although the most active Bitcoin options contract remained the $80,000 call.

Altcoins accounted for roughly $350 million of the $450 million in total crypto liquidations, according to CoinGlass. Solana (SOL) erased its early July rally, falling back to around $77 after briefly reaching $84 earlier this week. MORPHO stood out as one of the few gainers, rising 4% after its total value locked reached a record 4 million ETH, according to DefiLlama. Meanwhile, the average altcoin relative strength index dropped to 40, suggesting several tokens are entering oversold territory that could attract bargain hunters if market sentiment stabilizes.