Bitcoin edges lower as geopolitical tensions and rate concerns weigh on crypto

Bitcoin dips amid U.S.-Iran tensions and rate uncertainty

Bitcoin fell 0.9% to $64,139.0 by 02:10 ET (06:10 GMT) on Monday, extending a period of muted price action after a quiet weekend. The token stayed within a trading band that has dominated most of this year, as demand for crypto assets remained weak. Bitcoin was also trading about 50% below an October record high and continued to nurse substantial losses for the year.

Risk appetite was dampened by escalating tensions between the United States and Iran after both sides carried out further strikes over the weekend. The U.S. was seen broadening the scope of its attacks on Iran following the death of at least three service members, while Tehran responded by maintaining attacks on surrounding Gulf countries and American bases in the region.

Oil prices rose sharply as the heightened aggression disrupted shipping in the Strait of Hormuz. The uptick in crude prices added to concerns over energy-driven inflation, raising the prospect that the Federal Reserve could consider additional interest rate increases later this year. While the central bank is widely expected to keep rates unchanged at its July meeting, markets remained alert for hawkish signals from policymakers, especially after several Fed members recently warned that rates might need to rise further to address sticky inflation. Elevated rates are generally seen as negative for non-yielding assets such as Bitcoin and other cryptocurrencies.

Debate over proposed BIP-110 Bitcoin upgrade

Separately, discussion over a proposed Bitcoin blockchain software change, BIP-110, added another focal point for the market. MicroStrategy Inc Chair and prominent Bitcoin advocate Michael Saylor on Sunday cautioned against the upgrade, which is designed to temporarily limit the amount of non-monetary data—such as Ordinals—stored on the blockchain and to refocus on Bitcoin’s monetary role.

In a social media post, Saylor argued that a soft fork like BIP-110, which could render some blocks invalid, should be reserved for addressing severe failures, and said the proposal does not fix any known critical bugs. Supporters of BIP-110 contend that the change would remove spam from the blockchain and reduce unnecessary burdens on node operators.

Broad crypto market follows Bitcoin lower

Broader cryptocurrency prices declined on Monday after a subdued weekend. Ether, the world’s second-largest crypto by market capitalization, fell 0.7% to $1,857.05. XRP also dropped 0.7%, Solana slipped 0.2%, and Cardano declined 2.4%. BNB was down 0.7%.

Memecoins were also weaker, with Dogecoin falling 1% and $TRUMP dropping 4.1%. Overall, crypto markets have largely underperformed this year in line with Bitcoin’s weakness.

FAQ

Why did Bitcoin fall on Monday?
Bitcoin declined 0.9% to $64,139.0 as markets reacted to escalating U.S.-Iran tensions, higher oil prices, and concerns that persistent inflation could lead to further U.S. interest rate hikes, all of which weighed on demand for risk assets, including cryptocurrencies.

What is BIP-110 and why is it controversial?
BIP-110 is a proposed Bitcoin blockchain upgrade aimed at temporarily restricting large amounts of non-monetary data, including Ordinals, to prioritize Bitcoin’s monetary function. Michael Saylor warned against the soft fork, arguing such changes should be reserved for severe failures and that BIP-110 does not address any known critical bugs, while proponents say it would reduce spam and node burdens.

How did major altcoins perform?
Major altcoins moved lower alongside Bitcoin: Ether fell 0.7% to $1,857.05, XRP dropped 0.7%, Solana slipped 0.2%, Cardano lost 2.4%, and BNB declined 0.7%. Memecoins Dogecoin and $TRUMP fell 1% and 4.1%, respectively.