On Sunday, the price of Bitcoin briefly fell to $98,300, and the market is now digesting the impact of Trump's order to target three facilities in Iraq.
This is the first time since early May that Bitcoin has dropped back into the five-digit range, indicating that this situation is quite significant. The military action by the U.S. is seen as a major escalation in the U.S.-Iran conflict, meaning the U.S. government is officially getting involved.
Iran has also stated that 'all means are possible' and is considering its next steps for retaliation; Trump's stance is also very firm, stating that if Iran dares to retaliate, the U.S. will respond with military force.
Since Wall Street is closed on weekends, Bitcoin became the first major asset to reflect this situation, essentially giving an early indication for Monday's stock market opening.
Previously, analysts generally believed that institutions were particularly keen on buying Bitcoin spot ETFs, which would support BTC prices from truly dropping below $100,000. However, the next few days will be the real test of this statement—if geopolitical risks continue to escalate, it could directly ruin the current bull market.
Similar to most pullback scenarios, Bitcoin's drop isn't severe, but other altcoins are faring worse. In the past week, Bitcoin dropped nearly 4.5%, Ethereum fell by 12%, and Solana plummeted by 13%.
The Tokyo stock market has already reflected the tension in the geopolitical situation, with the Nikkei index dropping 1%, which has also set the tone for the opening of U.S. stocks.
What does the bombing mean for the market?
Within the 'Make America Great Again' (MAGA) camp, many originally opposed Trump's actions against Iran—now the biggest uncertainty lies in whether this time the U.S. will merely 'fire a shot and stop' or trigger a new round of escalating conflict.
As the situation continues to escalate, oil prices have surged, reaching a five-month high, which may further boost inflation and deter the Federal Reserve from cutting interest rates in the short term.
As risk sentiment deteriorates, funds may accelerate their withdrawal from risk assets, turning to safe-haven targets—including the U.S. dollar, which is not good news for Bitcoin.
Considering the high correlation between BTC and U.S. stocks, the historical response of the S&P 500 during heightened tensions in the Middle East can also be referenced. According to Reuters data, the S&P index usually drops 0.3% within three weeks after a conflict breaks out, but rises about 2.3% on average two months later. This could be a positive signal for Bitcoin bulls, indicating that the market is expected to regain momentum.
But history does not necessarily repeat itself—especially when the U.S. president is one of the most unpredictable and controversial leaders in history, the uncertainty in the market is also unprecedented.
The complex relationship between Iran and cryptocurrencies
The escalation of the current situation in the Middle East has again brought the connection between Iran and cryptocurrencies into focus.
Due to long-term Western economic sanctions, the Iranian public widely relies on crypto assets as a safe haven and payment tool. Several on-chain analytics firms have disclosed that Tehran officials conduct cross-border settlements and international payments through cryptocurrencies.
Binance has also been embroiled in controversy—this exchange once allowed Iranian users, ultimately paying billions in fines for it, leading to the resignation of founder Changpeng Zhao (CZ).
Past estimates indicated that Iran once accounted for 3.1% of global Bitcoin hash power, but this proportion has significantly declined as local power shortages have worsened.
Just days before the U.S. military action, Iran's largest exchange, Nobitex, suffered a hack involving over $90 million. The hackers are suspected to have ties to Israel, and surprisingly, they did not siphon off funds for profit but transferred assets to vanity addresses with 'anti-Iran Revolutionary Guard' messages, effectively destroying the funds.
The stolen assets include Bitcoin, Ethereum, and Dogecoin. 24 hours later, the source code of Nobitex was leaked, igniting market discussions. The platform claims to have over 7 million users, and the scale of this incident should not be underestimated.
Currently, global attention is once again focused on Tehran. Iran may retaliate against U.S. military bases overseas, block the Strait of Hormuz, or choose to negotiate. However, the Iranian Foreign Minister has indicated that the diplomatic window is almost closed, accusing the U.S. of 'blowing up' all options for peace with its actions early Sunday.
The Crypto Fear & Greed index currently shows a score of 37, indicating rising fear in the market. In this context of intertwined geopolitical and on-chain risks, crypto investors should respond cautiously and be prepared for potential black swan events.