Escalation in the Middle East: Bitcoin Comes Under Selling Pressure

When Geopolitical Tensions Turn Bitcoin Into a Risk Asset

The recent military escalation between the US, Israel, and Iran reveals an uncomfortable truth for Bitcoin investors: In times of crisis, the supposedly uncorrelated leading cryptocurrency behaves like a classic risk asset. With a decline of six percent and a drop below $64,000, Bitcoin promptly reacted to news of joint airstrikes against Iranian targets. The reaction shows that Bitcoin in its current market phase is by no means functioning as a safe haven – on the contrary: when uncertainty rises, positions are reduced, not built up.

The Facts

US President Donald Trump and the Israeli government confirmed extensive military operations against Iran over the weekend ^[2]. In a video address, Trump stated it was a massive and ongoing operation to protect the American people. The attacks particularly targeted Iran's nuclear infrastructure ^[1]. Trump concluded his speech with an appeal to the Iranian population: "When we're finished, take over your government; it will be yours" ^[1].

Israeli Defense Minister Katz described the operation as a preemptive strike against targets in Tehran to eliminate threats to Israel ^[2]. According to a US government official speaking to Reuters, the attacks were conducted from the air and sea ^[2]. In addition to Tehran, explosions were also reported in Isfahan, Qom, Karaj, and Kermanshah ^[2]. Iran responded by launching missiles at Israel and announced "devastating" retaliation ^[2].

The reaction in crypto markets was immediate. Bitcoin fell six percent within 24 hours and was trading at approximately $63,700 at the time of reporting ^[2]. Since US stock markets were closed over the weekend, Bitcoin reacted as one of the few continuously traded assets in isolation to the geopolitical escalation ^[1]. Within four hours, liquidations totaling over $250 million were recorded ^[1].

Particularly revealing was the correlation with traditional markets: the 24-hour correlation with the S&P 500 stood at 0.75, despite US exchanges being closed for most of the period ^[2]. This indicates a tight coupling with classic risk assets. Of the total $87.84 million in Bitcoin liquidations, $75.67 million came from long positions ^[2]. Negative funding rates signaled ongoing selling pressure in the derivatives market ^[2].

The escalation hits Bitcoin at an already tense moment. The leading cryptocurrency is on the verge of closing its fifth consecutive month with losses – a scenario that last occurred seven years ago ^[1]. Additionally, hot US inflation data on Friday added pressure, after Bitcoin bulls unsuccessfully attempted to reclaim key support levels near $70,000 ^[1].

Analysis & Context

Bitcoin's reaction to the escalation in the Middle East is another data point in a now well-documented development: Bitcoin behaves like a risk asset in acute crisis situations, not like digital gold. The correlation of 0.75 with the S&P 500 is remarkably high and refutes the often-heard thesis that Bitcoin is an uncorrelated asset or even a safe haven in turbulent times.

Historically, Bitcoin follows a clear pattern during geopolitical shocks: initial sales due to risk reduction, followed by a potential recovery once the situation stabilizes or at least becomes predictable. This was the case with previous Iran conflicts in 2025, as referenced by the trading resource The Kobeissi Letter ^[1]. The determining factor will be whether the situation develops into a prolonged conflict or remains limited to contained military strikes.

The massive liquidation of over-leveraged long positions totaling more than $75 million shows that many traders had expected a continuation of the upward movement. However, negative funding rates indicate that sentiment in the derivatives market has now shifted. In the short term, this could paradoxically be bullish: when over-leveraged positions are cleared out, the risk of further forced liquidations decreases. In the medium term, however, the development depends heavily on further geopolitical developments and the reactions of traditional markets once US futures reopen on Monday.

The fact that Bitcoin could seal its fifth consecutive loss month with this escalation reinforces the already fragile technical situation. The psychologically important $70,000 mark remains out of reach, while support at $63,000 is now being tested. A sustained breach of this level could trigger further selling waves and target the $60,000 level or below.

Conclusion

• Bitcoin continues to react to geopolitical crises like a classic risk asset with a 0.75 correlation to the S&P 500 – the safe haven thesis finds no confirmation in practice

• The liquidation of over $75 million in long positions indicates a sentiment shift in the derivatives market, but could paradoxically lay the groundwork for stabilization

• The technical situation remains tense: with a threatening fifth consecutive loss month and failed attempts to reclaim the $70,000 mark, the market structure is fragile

• Critical for further development will be the reaction of traditional markets when US futures reopen on Monday – Bitcoin is likely to follow this movement

• Investors should closely watch the support at $63,000: a sustained breach could trigger further selling waves and bring lower levels around $60,000 or below into play