Rising War Storm: How US Involvement in Israel-Iran War Could Shake Bitcoin’s Momentum
Key Takeaways
• Short-term crash (10-20%) likely if US intervenes.
• Recovery depends on duration of war and Fed response.
• $100K Bitcoin is a key psychological support.
• Oil prices and inflation are key secondary drivers.
• Institutional flows could cushion long-term losses.
Geopolitical Powder Keg
As the war between Israel and Iran intensifies, global markets are teetering on the edge. The key unknown? Will the US get directly involved in the war? Forecasting platform Polymarkets puts the odds at 62% for July and 90% for August – the numbers speak to clear concern. President Trump’s volatile rhetoric demanding Iran’s “unconditional surrender” has signaled imminent military action. For Bitcoin investors, this is not abstract geopolitics - it will prove to be a potential major market shock. Only time will tell.
Immediate Impact: Brace for Turmoil
1. Large-Term Crash (10-20% Drop)
Historical parallels suggest a violent reaction. When Russia invaded Ukraine in 2022, Bitcoin fell 12% in a week. Analysts unanimously predict a similar time: 10-20% is not enough if US missiles fly. This is not theoretical – after the June Israeli attacks, BTC fell 4.5% in the hours between liquidations of $1B+.
2. Risk of Domino Effect
Crypto behaves like tech stocks during crises, not “digital gold”. Current data shows:
+0.61 correlation with Nasdaq
-0.07 correlation with gold
Traders are dumping speculative assets, moving to dollars and Treasuries The crypto fear and greed index (currently 60/“greed”) could quickly flip into “fear” territory like it did in April 2024 when BTC fell 8.4% after Iran attacked Israel.
3. Oil, Inflation, and the Fed’s Whiz
Here’s the hidden trigger: oil prices. If the conflict blocks the Strait of Hormuz (20% of global oil exports), energy inflation will rise. This could force the Fed to:
Delay rate cuts (currently priced in late 2025)
Maintain a hawkish policy for longer than expected
Higher rates = stronger dollar = weaker crypto. Treasury yields near 4.4% already put pressure on Bitcoin’s valuation.
Table: Bitcoin’s Historical Reactions to Geopolitical Events
Event BTC Initial Reaction Recovery Timeline
Russia Ukraine Invasion (2022) -12% (1 week) 4-6 weeks
Iranian Embassy Strike (April 2024) -8.4% (1 day) 3 weeks
Israel-Gaza War (October 2023) At least 50-day rise
Ethiopia/Myanmar Wars No Reaction N/A
Long-Term Scenarios: Recovery or Rebound?
1. Immediate Ceasefire = V-Shaped Rebound
If the US intervention is surgical and diplomacy takes precedence, history suggests a 4-6 week recovery. After the initial shock from Ukraine, BTC recovered 16% in 5 days as crypto became a viable platform for refugees and donors. Institutional buying continues - MicroStrategy adds 10,001 BTC ($1B) on June 16 despite anxiety
2. Long war = extended volatility
A regional quagmire will:
Drain market liquidity
Suppress altcoin recoveries (ETH often lags BTC)
Freeze institutional inflows.
QCP Capital warns of “double tail risk” - war inflation + monetary tightening risk assets being crushed.
Strategic implications for crypto investors
1. Key levels to watch.
Bitcoin: $100K psychological support; bearish momentum signals on break below $102,734
Ethereum: $2,000 must hold to halt cascade
BNB: $654 resistance; $638 Support
2. The War’s Crooked Silver Lining
Long-term inflation from war spending could revive Bitcoin’s “fat hedge” narrative. As Weller CEO Mithil Thakur notes:
“Geopolitical tensions increase the likelihood of higher inflation… which should benefit Bitcoin.”
Yet it fights tight monetary policy – a fundamental tug-of-war.
3. Tactical Moves
Watch Oil Futures: Spikes signal inflation risk.
Track Treasury Auctions: High Yields Hurt Crypto
Hedge with Puts: 6-Month Option is Negative.
Dollar Cost Averaging: Institutions Bought $1.4B BTC Last Week.
Verdict: Macro Trumps Crypto Fundamentals
Bitcoin Won’t Decouple from Traditional Markets if War Breaks Out Its fate depends on:
The Fed’s response to inflation
Oil price stability
The duration and scale of the war
Short-term pain seems inevitable, but Bitcoin’s resilience in past crises points the way to recovery. As one analyst put it bluntly: “BTC’s future will be determined by macro conditions — not crypto fundamentals.” For investors, that means aggressive hedging, preparing to buy dips when hopes of a ceasefire emerge.
Table: Key indicators for Bitcoin’s war response
Indicator Bullish signal Bearish signal
Oil prices steady below $90 a barrel, spike above $110.
Fed rate policy cuts dovish tone, “high for longer” stance.
DXY Index Weakness Below 98 Strength Above 100
BTC On-Chain Exchange Exits, Accumulation of Increasing Exchange Flow
VIX Index Rises Above 30 from Below 20
A Storm is Forming, But Bitcoin Has Weathered Similar Storms. Be Prepared for Turmoil – Not for Surrender.
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