Bitcoin quickly drops 3.5% as fresh Iran escalation short-circuits crypto rally

• Fresh news about escalating military action in the Middle East put an end to bitcoin's rally to $74,000.
• The S&P 500 and Nasdaq indexes also turned early morning gains into losses, with oil climbing more than $4 per barrel from its lowest levels of the day.

The crypto rally ran into a wall on Friday as fresh headlines of potential escalation in the Iran conflict abruptly cooled risk appetite across markets.

Among the developments, the U.S. Central Command confirmed that all six crew members aboard a refueling aircraft that crashed in Iraq on Thursday had died.

Meanwhile, the Wall Street Journal reported that the Pentagon is deploying a Marine expeditionary unit (thought to be 2,500 troops) to the Middle East, including forces attached to the USS Tripoli, as Iran steps up attacks around the Strait of Hormuz.

Bitcoin, after rallying to near $74,000 earlier in the session, reversed sharply to $71,200 following the news, still holding onto 1.9% gain over the past 24 hours. Ethereum's ether (ETH), Solana's SOL (SOL) and DOGE$0.09587 were 3% higher during the same period, though also retreating from their session highs.

U.S. equities surrendered early gains, with the S&P 500 and Nasdaq flipping to 0.4%-0.5% declines. Gold, which often benefits from geopolitical turmoil, extended its recent pullback by another 1%, Oil, on the other hand, climbed more than $5 per barrel from its lowest levels of the day, now higher by nearly 2% for the session at $97.30.

"Optimism over geopolitical events, including Russian sanction relief, has been a driver" behind the price action, said Paul Howard, director at trading firm Wincent. "These headlines tend to have a short half-life, so [we] would expect this to be short-lived till we see concrete follow-up action."

Crypto-linked equities continue to be mostly posting gains for the day. Bitcoin miner Marathon Digital (MARA) led the advance with a 10% jump, while Galaxy Digital (GLXY), Ethereum treasury firm Bitmine (BMNR) and AI data-center focused miner Cipher Mining (CIFR) all climbed 5%-7%.

• Circle's USYC token has become the largest tokenized U.S. Treasury product, with about $2.2 billion in supply, overtaking BlackRock's BUIDL fund.
• Much of USYC's recent growth is tied to its use on BNB Chain, with Binance introducing the token as off-exchange collateral for institutional derivatives trading.
• The overall market for tokenized U.S. Treasuries has surged to a fresh record of over $11 billion, up 27% this year, fueled by investor demand for yield and a place to park capital during the crypto downturn.

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