Bitcoin Price Drops Amid Geopolitical Tensions

Investing.com — Bitcoin’s price dropped on Tuesday, losing ground after a weekend rally as concerns over worsening geopolitical tensions across the globe dented risk sentiment, along with anticipation of more economic cues.

The world’s largest cryptocurrency fell 2% to $62,456.0 by 08:43 ET (12:43 GMT), tracking overnight declines in stock markets.

China Trade Jitters, Oil Price Spike Dent Sentiment

Losses in crypto came in tow of broader losses across risk-driven markets, as sentiment was soured by a slew of geopolitical risks.

Canada imposed fresh trade tariffs on China, following similar measures from Europe and the U.S., drawing Beijing’s ire. The move ramped up concerns over a renewed trade war with the West, which bodes poorly for the world’s biggest economies.

A spike in oil prices also spooked markets, with an Israel-Gaza ceasefire showing little signs of materializing, while a row in Libya over the central bank’s leadership resulted in halting all oil production in the country.

The increased geopolitical risks offset recent cheer over lower U.S. interest rates, sparking losses across stock and crypto markets. Gold enjoyed some safe haven demand, as did the dollar, which recovered from 13-month lows.

Rate Cut Bets Remain in Play

Despite these challenges, Bitcoin still retained a bulk of its gains made over the weekend due to dovish comments from the Federal Reserve, cementing expectations for a September interest rate cut.

Traders are divided over a 25 or 50 basis point reduction, according to CME Fedwatch.

The prospect of lower rates is favorable for speculative assets like crypto, as it increases liquidity for investment. This notion contributed significantly to crypto’s bull run in 2021.

Bitcoin was further supported by expectations of a friendlier regulatory environment in the U.S. after independent presidential candidate Robert F. Kennedy Jr. suspended his campaign and endorsed Republican frontrunner Donald Trump, who advocates for crypto.

Trump has maintained a more favorable stance on crypto compared to Democratic candidate Kamala Harris, prompting expectations that a Trump presidency would usher in friendlier regulations.

Crypto Price Today: Altcoins Track Bitcoin Losses

Among broader crypto markets, altcoin prices also retreated on Tuesday, falling in tandem with Bitcoin.

World no. 2 token Ether sank 4% to $2,614.4. SOL, ADA, and XRP lost between 0.5% and 3.5%, while MATIC shed over 3%. Among meme tokens, DOGE fell 3.2%.

Bitcoin Mining Sector in Consolidation Phase: Analysts

In other news, analysts at Architect Partners noted that the bitcoin mining sector is currently in a consolidation phase, largely driven by the recent halving event in April.

“The strategic driver is to secure large and scalable data center capacity with access to low-cost power and capital, all made easier as a company gets larger,” the investment bank stated in a report seen by CoinDesk.

A key example of this trend is Bitfarms Ltd (TSX: BITF)’s planned acquisition of Stronghold Digital Mining Inc (NASDAQ: SDIG). This follows Bitfarms being the target of an unsolicited takeover bid from rival miner Riot Platforms (NASDAQ: RIOT) in May.

Riot has since acquired 19% of Bitfarms’ stock, attempted to replace management, and engaged in a proxy battle to replace board members. In response, Bitfarms announced its acquisition of Stronghold, alongside management and board changes.

“Sometimes the best defense is offense,” Architect Partners noted.

However, they cautioned that hostile M&A activity can be challenging, especially in sectors like technology and financial services, where individual talent is crucial. “Bitcoin mining is very different where physical facilities with access to electricity and widely available computing equipment are the core assets,” the analysts explained.

Interestingly, they highlighted the irony of this consolidation, as bitcoin’s creator, Satoshi Nakamoto, originally envisioned a decentralized network where no single entity would control a large portion of the hashrate.

The impact of this consolidation on the industry remains to be seen, but some, including Jack Dorsey and his company Block, are actively working to counter this trend by building semiconductors and systems to foster a return to mining decentralization.