The crypto market fell 2.5% on Friday to $2.45 trillion as hopes of an end to the ongoing U.S. Iran war faded.

According to data from crypto.news, Bitcoin (BTC) price dropped 2.5% on the day to $69,445 at the time of writing as bulls failed to defend the $70,000 psychological support. Ethereum (ETH) was hit harder, falling 4.4% to $2,080, while other major altcoins such as BNB (BNB), XRP (XRP), Solana (SOL), and Dogecoin (DOGE) saw losses ranging between 3% and 5%, respectively.

As crypto prices fell, it triggered a massive unwinding of bullish long positions from traders in the crypto derivatives markets. Data from CoinGlass shows that over $193 million in long positions were liquidated from the crypto market in the past 24 hours. Out of this, Bitcoin accounted for $48.93 million while Ethereum saw $75.93 million in long liquidations.

Liquidations occur when a trader’s margin account can no longer support their open positions due to significant price moves. When longs get liquidated, they are forced to sell their assets, which creates further downside pressure on prices.

Why is the crypto market tanking?

The crypto market downturn began after Iranian state media reported that Iranian officials had rejected a U.S. proposal to end the ongoing conflict between the two nations in the Middle East. This sparked uncertainty and deteriorated investor appetite for risk assets.

Asian tech stocks such as Japan’s Nikkei 225, Hong Kong’s Hang Seng, and South Korea’s KOSPI dipped lower on Friday shortly after the news broke. Even gold, touted as a safe haven asset amid times of economic stress, also fell 2.9% over the day to under $4,500. Silver fell 6% to $68.

Meanwhile, crude oil prices regained strength as the Strait of Hormuz remained closed for the fourth consecutive day. WTI crude futures rose 3.3% above $93 per barrel on Friday, while Brent oil rose 3.7% to above $106.

The closure of the key maritime bottleneck has severely disrupted global oil flows, resulting in the loss of millions of barrels of daily supply. This has sparked concerns of surging inflation and a supply chain crisis that could ultimately further push back hopes for Federal Reserve rate cuts this year.

According to the CME Group FedWatch tool, the odds of the Federal Reserve holding interest rates steady at 3.5% to 3.75% remain at 93.8%, while 6.5% expect a 25 basis point rate hike.

Risk assets, including cryptocurrencies, have often rallied when liquidity is high, or the market expects a rate cut, and typically decline when the central bank maintains a hawkish stance on monetary policy.