Impact of Current Geopolitical Crises on the Digital Currency Market (July 2025)

The Impact of the Current Geopolitical Crises on the Digital Currency Market (July 2025)

Annual witnessing

1. Current prominent geopolitical crises

The Russian-Ukrainian War (2022–2025): Despite more than two years since its outbreak, the war in Ukraine continues as one of the biggest sources of global instability. This crisis was accompanied by broad Western sanctions against Russia, and attempts to form alternative financial flows through digital currencies. In the early days of the war (February 24, 2022), Bitcoin prices rose by nearly 20% when traders traded that the Russians would convert frozen assets into digital assets. However, rising energy prices in Europe and pushing central banks to raise interest rates subsequently led to a major market collapse; Bitcoin fell by about 65% during 2022. On the other hand, the Ukrainian government successfully used cryptocurrencies to receive donations (about $127 million by early 2025, or about 6.5% of its early aid), while Russian entities sought to evade sanctions by trading digital assets. These developments make the Ukraine crisis a central example of how traditional conflicts interact with the digital asset market, through a rush in demand in the early stages of the crisis and later a fall under the influence of the accompanying economic factors.

Middle East tensions (Israel–Iran and Gaza 2023–2025): During the recent period, conflicts in the Middle East have escalated, with fighting breaking out between Israel and Palestinian factions in Gaza in October 2023, and in 2024 and 2025 the region witnessed military clashes between Israel and Iran (such as Operation "Lion of Jerusalem" and direct Iranian threats). These tensions affected financial markets significantly. For example, after Israeli raids in June 2025, Bitcoin fell below $100,000 for the first time in 46 days, but quickly recovered above this level. At the same time, the price of gold fell to record levels (nearly $3,450) despite the military escalation. In the regulatory environment, analysts warn that escalating conflict could increase demand for safe havens, including mobile cryptocurrencies, given the difficulties of converting gold in times of tension. A recent report quoted an analyst at "Gate" as saying that digital currencies may become a "preferred haven due to their ease of transfer compared to gold" if the conflict escalates. Overall, the recurring conflicts in the Middle East during 2023–2025 produced sudden fluctuations in crypto markets, with short falls followed by rapid rebounds as major institutions and investors intervened.

Global Trade and Economic Disputes (America–China, and other trade reforms): Economic tensions between major powers (such as trade disputes between the United States and its partners) have led to additional fluctuations in digital markets. In May 2025, for example, a Reuters report indicated that the announcement of trade talks between the United States and Britain restored optimism to the markets, raising Bitcoin's price above $100,000 for the first time since February. In contrast, US President's announcement of tariff attacks and increased tariffs in April 2025 led to an immediate selling wave on high-risk assets: Bitcoin's price fell by about 5.5% (bringing it to its lowest level in 2025) with rising fears of a global trade war. These examples embody that major economic disputes, whether about tariffs or the repercussions of raising interest rates, bear clear imprints on the movements of Bitcoin and others: when trade climates calm, the market rises (as in the announcement of a "breakthrough deal" between America and Britain), and when trade tightening ignites fear, followed by sudden rises in demand for traditional and safe assets.

Energy Disruptions (Gas and Oil): The energy crisis plays a double role in the dynamics of the crypto market. On the one hand, oil and gas price pressures raise inflation rates and push central banks for tight monetary policies, which weakens speculative assets including digital currencies. An example of this is the record rise in gas prices in Europe due to the Ukrainian war, which forced the US Federal Reserve to the fastest interest rate hike cycle in decades, and contributed to a 65% collapse in the price of Bitcoin in 2022. On the other hand, the Middle East region and the instability of the Strait of Hormuz (passing 20% of the world's oil) constitute an additional risk: widely circulated estimates indicated that the possibility of closing Hormuz by Iran (as its military commander threatened in June 2025) could raise oil prices enormously and lead to global inflation and perhaps recession. Such disruptions could move investors towards safe assets such as gold and perhaps digital currencies linked to it, but the most important thing is that they reflect the extent of the link between traditional material crises (energy, high prices) and the severe fluctuations in the crypto market.

Other Regional Tensions (Asia and others): Although conflicts in East Asia (such as Chinese–Taiwanese tensions or conflicts on the Korean Peninsula) have not witnessed major events directly affecting them until mid-2025, the escalation of trade tensions between America and China has been an important factor. A Reuters report in May 2025 indicated that easing the trade war between Washington and Beijing contributed to Bitcoin's rise to its historical highs (close to $109,760). In terms of regional monetary policy, both Japan and China are preparing for a kind of flexibility in their inflationary policy due to the tumultuous external conditions, which may change the dynamics of demand for digital assets locally and internationally. The prospect of escalation with North Korea (cyber attacks and military threats) is also gaining increasing importance: in early 2025 a huge amount of cryptocurrencies was lost in thefts attributed to North Korea, which may increase investors' fears of the dangers of digital currencies and encourage stronger government restrictions.

2. The impact of crises on digital currency prices

The price of Bitcoin and Ethereum (and other major currencies) is heavily affected by major global events. In general, escalating tensions lead to increased price volatility with a rapid decline often followed by a rebound. For example:

Sudden Decline with Subsequent Improvement: When the crisis breaks out, there is often a rapid decline in prices due to investor panic (high selling volume). The Ukraine crisis in February 2022 came as a start with a sharp decline followed by a subsequent decline with the entry of new liquidity. At the beginning of the outbreak of the Middle East conflict in June 2025, Bitcoin fell to about $105,000 and then rebounded quickly after days thanks to purchases from institutional entities (such as MicroStrategy buying $1 billion of Bitcoin). This pattern reflects the desire of some strategic investors to seize low prices during crises.

Upward Momentum and Approaching Record Numbers When Conflicts Subside: With the fading of panic or the calming of tensions, the attraction to Bitcoin returns. In the first half of 2025, Bitcoin reached its historical highs near $110,000 after the path of de-escalation in trade disputes became clear. Ethereum also saw increases with increased demand for digital assets in general. Based on 2025 data, the "Bitcoin" index had risen about 13% since the beginning of the year, about half the level of gold's rise in the same period (about 30%), indicating a return to risk appetite.

Increasing link to traditional markets in times of crisis: Several analyzes confirm that Bitcoin still often reacts like any risky asset. When traders withdrew capital to bonds and safe markets after a trade escalation in April 2025, Bitcoin's price fell by more than 5% (compared to a general decline in stocks). Analysts have noticed an increase in Bitcoin's link to US stock indices (the correlation coefficient reached ~0.6 in 2025 versus 0.2 before 2020), which means that Bitcoin tends to move with risky assets in times of tension rather than enhancing its role as a separate haven.

Transaction Volume and Trading During Shocks: Crises often indicate a moral increase in buying and selling transactions. For example, during the escalation wave in June 2025 in the Middle East, the "CoinDesk" platform witnessed the highest trading volume in the Asian business period when the price of Bitcoin ranged between $104,182 and $106,135, with the implementation of about 15,000 Bitcoin units during a short upward turn. On the same day, huge data trades exceeding $1 billion were recorded due to the settlement of futures contracts (FAT – FCM) that are produced automatically when prices move intensely. In contrast, the total daily trading volume in the digital market reached about $129 billion and decreased by ~4% during the first 24 hours after the crisis escalated, reflecting immediate supply and demand fluctuations. In general, the data show that crises lead to a sharp fluctuation in trading volume (prevalent at the peak of the news), coinciding with the market's absorption and the ambiguity of investor sentiment.

3. Impact on market sentiment and investor confidence

Investor confidence generally declines during crises, with lower risk trends and rapid rebounds followed by relative stagnation afterwards. Studies indicate that major geopolitical events significantly weaken market sentiment and increase Bitcoin's link to traditional assets (such as stocks and bonds). In times of fear, capital is withdrawn from high-risk assets, including digital currencies, so their movements become intertwined with stock market fluctuations. Research has also shown that excessive attention to military developments, for example, led to a moral pressure on Bitcoin in 2022, while it experienced short rebound waves with every indication of improved peace and the return of investor appetite.

In recent weeks, the Fear & Greed Index has shown that despite the severity of the tensions, the general trend remained at a degree of mild "greed". During the June 2025 crisis, the index fell from 65 to 61 (on a scale of 0–100), but remained above the danger level, reflecting that Bitcoin believers did not descend into a state of absolute panic. Another indicator is that institutional investor demand remained relatively stable: in mid-June 2025, traded funds maintained positive flows, albeit at a slower pace than the month's peak (for example, daily imports of $165 million for Bitcoin versus $431 million daily before the crisis). This partial aversion to buying illustrates the growing caution, while the drawn "bottom" signs (launching calls to repurchase below benchmark support levels such as $60,000 for Bitcoin) indicate that many are still betting on the long-term upward reversal.

4. Are Digital Currencies a Safe Haven or a Risky Gamble?

Expectations differed as to whether Bitcoin and other digital currencies would be a safe haven in times of crisis. On the one hand, some analysts believe that increased tensions may push investors to look for alternative options free of central bank restrictions; an analyst at the "Gate" platform predicted that the crises in the Middle East could "intensify demand for safe havens, and cryptocurrencies may stand out as a preferred haven due to their portability compared to gold." Similarly, a research team from BitsCrunch analyzed that Bitcoin maintained its relative strength even during the May 2025 strike, and quickly recovered (to above $110,000) in just a few days, which confirms the existence of supported institutional demand (investment banks, ETFs, major investors) who see the crisis as an opportunity to buy at a low price.

But the opposing team confirms that digital currencies have not yet proven their worth as a safe haven. For gold – the symbol of the traditional safe haven – it recorded record highs reaching about +30% in 2025 with increasing inflationary pressures. While Bitcoin only achieved relative gains (about +13% until May) and remained linked to risk indicators. "Cointelegraph" analysts also pointed out that Bitcoin "still trades more as a risk asset similar to US technology stocks and not as a safe haven like gold." In another report, a researcher at "CoinDesk" clarified that Bitcoin did not experience a deep panic during the recent crisis detonation; rather, its performance was described as "resistant" after the initial selling waves, knowing that price stability was linked to investors returning to buying at support levels (about $105k).

Accordingly, it appears that the role of digital currencies as a safe haven in 2025 remains limited and contested: the unique factors of digital currencies (such as cross-border trading at high speed) have contributed to their use in some cases as a hedge, but ultimately digital currencies remain "high-risk assets" whose interaction with crises is conditional on global sentiment and political intervention. As the head of a hedge fund stated, "Bitcoin sales in times of panic show that it is acting as a traditional risky asset; and Bitcoin must separate from those correlations if it wants to be a true safe haven."

5. The Role of Regulatory Bodies and Government Restrictions

During crises, governments and regulators may play different roles in relation to the crypto market.

Supportive legislation (easing restrictions): Countries such as Russia have resorted to adopting policies supporting digital currencies. Moscow has issued new laws allowing commercial mining and the use of cryptocurrencies in international payments, in an explicit move to ease the impact of Western sanctions on its economy. A Chainalysis report confirms that Russia in the fall of 2024 "legalized mining operations and allowed transactions in digital currencies in order to mitigate the impact of sanctions." Similarly, the BRICS group (Brazil, Russia, India, China, South Africa) is discussing the use of a common digital currency or payments outside the dollar, while China is looking for alternative mechanisms for bilateral trade (such as partial settlement in yuan and permanent stabilization in official digital currencies).

Restrictive Measures (Enforcement Campaign and New Laws): In contrast, the United States and its allies have intensified pressure on crypto networks linked to sanctions evasion and crime. In 2024–2025, major American and European agencies (financial and cyber organizations) targeted a group of suspicious trading exchanges and financial smuggling groups via crypto. The United States conducted extensive patrols against entities linked to the war in Ukraine (such as drone manufacturing companies that were requesting donations in Bitcoin), and the European Union banned transactions of encrypted financial institutions that facilitate sanctions evasion. The notable incident that swept the press in February 2025 was the theft of $1.5 billion from the "Bybit" exchange by North Korean agents. Such events (money laundering via Bitcoin to finance sanctioned regimes) are considered an additional catalyst for stricter laws; the concerned states stated that the stolen funds "will be used to manufacture nuclear weapons and terrorist programs."

The Broader Regulatory Climate: At the general legal level, the new US presidential administration announced in January 2025 its intention to reduce regulatory burdens on digital currencies. The US Chief Executive Officer signed an executive order to provide "regulatory clarity" in digital markets, in parallel with the establishment of working groups to develop a comprehensive framework for trading in cryptocurrencies. However, this relatively lenient approach from supervisors does not eliminate the need for anti-money laundering controls and investor protection, especially as crises increase the potential for exploitation of loopholes to manipulate. In general, the recent record shows that governments are taking a double-edged approach: while some countries benefit from digital currencies to circumvent sanctions, major countries are increasingly interested in ensuring transparency of transactions and subjecting trading platforms to strict supervision, to avoid exacerbating financial crises and eroding confidence in digital currencies as a whole.

6. Analytical examples and recommendations

Bitcoin and Ethereum during the war in Ukraine: An analysis of the past five years' data shows that Bitcoin was clearly sensitive to the war in Ukraine. As soon as the outbreak of the conflict was announced in February 2022, the price jumped by about 20%, but it quickly collapsed due to the effects of the external economic war. Since then, the level of Ethereum has varied, falling by about 65% by 2022 for the same reason as Bitcoin. The renewal of hope for peace negotiations (even if short-term) often brought prices back up (as happened in March 2022 when Bitcoin fell 12% coinciding with the failure of a possible truce).

Energy Crises and the Accompanying Collapse: Another example is the energy pressures resulting from the war. European dependence on Russian gas before the war and the halt of supplies led to record levels of prices, creating global inflation. We noted that every sharp jump in energy prices was accompanied by a reduction in risk appetite globally: in the fall of 2022 this forced the Federal Reserve to intensify raising interest rates, and made Bitcoin and Ethereum continue to fall, subtracting about half their previous value (compared to losses in traditional stock markets). Therefore, it can be said that any new "energy shock" (or economic slowdown resulting from it) will put negative pressure on Bitcoin in the short term.

Recommendations (Risk Management): Based on these data, experts recommend caution in dealing with digital assets during periods of geopolitical tension. It is helpful to monitor key technical indicators (such as support levels at $60,000 for Bitcoin and $2

Conclusion: Despite the recent developments on the global conflict fronts, digital currencies continue to show the ability to recover and react quickly to each event. However, the nature of their use as a "safe haven" is still a matter of debate, as they often appear as risky assets that follow the transformations of traditional markets. In contrast, the development of digital bonds and exchange-traded funds (ETFs) for Bitcoin allows it to address these fluctuations with relative calm. In all cases, evidence suggests that the current geopolitical crises increase the volatility of the crypto market and affect investor behavior, making risk management and financial diversification crucial in investment strategies in these assets.

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