How does war affect Bitcoin? In-depth analysis of the price trajectory over five years.

On June 13, 2025, Israel launched the "Operation Lion's Rise," attacking multiple cities, military bases, and nuclear facilities in Iran. Recently, Iran's largest crypto exchange Nobitex was hacked by Israeli hackers, resulting in losses of tens of millions of dollars in stablecoins. Bitcoin quietly fluctuated amidst the smoke of war, rising close to $110,000 before falling again. From the significant wars and conflicts that occurred between 2020 and 2025, we can observe Bitcoin's sensitive reaction to geopolitical events. This article will delve into the impact of major wars and conflicts over the past five years on Bitcoin's price movement, as well as the recovery trajectory of the crypto market after past wars.

The Watershed Moment of the Russia-Ukraine Conflict

The Russia-Ukraine conflict fully erupted on February 24, 2022, leading to speculation that Russian funds would flow into cryptocurrencies such as Bitcoin, causing the price of Bitcoin to soar by 20%, briefly breaking through $45,000. At the same time, Russian oligarchs attempted to transfer frozen assets through Bitcoin, seemingly confirming the "crisis value" of cryptocurrency.

However, in the long run, when the war drove European natural gas prices to historical peaks and the Federal Reserve was forced to initiate the most aggressive interest rate hikes in forty years, Bitcoin experienced a 65% crash in 2022. Although this decline cannot be entirely attributed to the war, the geopolitical uncertainty undoubtedly exacerbated the pessimism in the market.

Data source: bitscrunch.com

Interestingly, the persistence of the war has provided a new narrative support for Bitcoin. The Ukrainian government has raised millions of dollars in donations through cryptocurrency, highlighting the unique value of digital currency in the context of restrictions within the traditional financial system. At the same time, in the face of Western sanctions, Russia has also turned to cryptocurrency to some extent as a tool to evade sanctions, further strengthening Bitcoin's status as an alternative financial instrument.

It is worth noting that in 2014, Bitcoin fell into a long bear market after Russia's invasion of Ukraine. However, by 2022, Bitcoin had evolved into a larger, stronger asset class that was more accepted by institutional investors.

Market Test of the Israel War

On October 7, 2023, the Israel-Gaza conflict broke out. On October 11, according to bitsCrunch data, Bitcoin fell below $27,000, setting a new low since September, with traders generally attributing this to the negative impact of the Middle East conflict on investor sentiment. During the 2023 Gaza conflict, the USDT transfer volume increased by 440% week-on-week, with stablecoins becoming the new infrastructure.

Since the start of the Israel-Hamas conflict, the prices of digital assets have not shown significant fluctuation. This relative stability reflects a reduced sensitivity of the crypto market to geopolitical events.

Iran-Israel Conflict

In April 2024, under the Iran-Israel conflict, on the day of the missile attack, Bitcoin's volatility was only ± 3%, less than 1/3 of that during the Russia-Ukraine war in 2022. BlackRock's ETF had a net inflow of $420 million in a single day, forming a volatility buffer. The average daily trading volume of the spot ETF accounted for 55%, as the war sentiment was diluted by institutional order flows.

According to data from bitsCrunch, even amid significant geopolitical events such as Israel's airstrikes on Iran, the Bitcoin market has not entered panic mode. Although Bitcoin fell by 4.5% to $104,343 within the first 24 hours of the war's onset in June 2025, and Ethereum dropped by 8.2% to $2,552, this decline is still manageable relative to the severity of the events, demonstrating strong resilience.

However, according to the geopolitical risk ( GPR ) index, we find that currently, the index is showing an upward trend, around 158. The last time it exceeded 150 was early 2024. This index was constructed by Dario Caldara and Matteo Iacoviello. The geopolitical risk ( GPR ) index peaked around the times of the two World Wars, the early Korean War, during the Cuban Missile Crisis, and after the "9/11" events. The higher the geopolitical risk, the lower the levels of investment, stock prices, and employment rates. The higher the geopolitical risk, the greater the probability of economic disasters and the larger the downside risks to the global economy.

Data source: bitscrunch.com

The Best Window for Observing Capital Logic

The moment a ceasefire agreement is signed often serves as the best window to observe capital logic. In November 2020, when the Nagorno-Karabakh war ended, Bitcoin nearly doubled in the following 30 days. The reason this territorial dispute in the Caucasus ignited the crypto market lies in the fact that the war did not change the global easing tone, as the Federal Reserve's monthly $120 billion bond-buying program continued to nourish risk assets. In contrast, during the Ukraine-Russia negotiations in March 2022, the brief hope for a ceasefire was shattered by the Federal Reserve's announcement of a 50 basis point interest rate hike, causing Bitcoin to fall by 12%.

Data source: bitscrunch.com

On the day of the temporary ceasefire between Palestine and Israel in November 2023, the crypto derivatives market saw a liquidation of $210 million. The BTC to EGP exchange rate premium on the Egyptian over-the-counter exchange dropped from 8.2% to 2.1%, indicating a gradual decline in demand from war-torn regions. The narrative of war was quickly overshadowed by native narratives such as ETF approvals and the halving cycle. On January 15, 2025, Israel and Hamas agreed to a proposal for a ceasefire and the exchange of prisoners. Subsequently, Bitcoin surged sharply, breaking through $100,000 before falling again. The market performance during the Middle East conflict prompted a reevaluation of Bitcoin's characteristics as a safe-haven asset—Bitcoin and Ethereum cannot yet be considered safe-haven assets in the gold market.

Entering the Institutional Era

The war value of digital assets has not disappeared, but has been reconstructed in a contextual manner. The Ukrainian government received $127 million in crypto donations, accounting for 6.5% of its early international aid; the underground network in Gaza maintains its communication network through Bitcoin mining machines; Iranian oil traders use mixers to break sanctions... these real applications in the margins are forming a parallel dark line ecosystem that does not contradict Wall Street. As the mainstream market focuses on ETF fund flows, the demand for cryptocurrency in war-torn regions has become a new indicator for observing digital assets.

The current crypto market has formed a clear war response mechanism: crude oil prices trigger inflation alarms, the VIX panic index, and open contracts on Deribit, among others. According to bitsCrunch data, less than 5% of the safe-haven funds released from geopolitical conflicts eventually flow into the crypto space, and this number may further shrink in the ETF era.

The real turning point lies in monetary policy. When the Federal Reserve opens the interest rate cut channel, the signing of a ceasefire agreement will serve as an accelerator for capital inflows. On June 18, 2025, U.S. interest rate futures prices reflected a 71% probability of a rate cut by the Federal Reserve in September, up from 60% before the announcement, indicating a slight increase in the probability of a September rate cut. However, if the war causes disruptions in the energy supply chain, even if the conflict subsides, the shadow of stagflation will still suppress the crypto market. Monitoring the Federal Reserve's interest rates remains a top priority.

The Recovery Model of the Crypto Market After the War

From the perspective of concluded conflicts, the end of war often brings about a gradual restoration of market confidence. For the Bitcoin market, the advancement of peace processes typically reduces the geopolitical risk premium, making investors more willing to take on risks. This rebound in risk appetite often benefits the price performance of risk assets such as Bitcoin.

If Bitcoin shows good risk resistance during the war, institutional investors may increase its weight in their portfolios. Conversely, if performance is poor, there may be pressure for capital outflows. From recent performance, Bitcoin's relative stability during geopolitical crises may enhance its status among institutional investors.

Conclusion

Looking ahead, with the continuous advancement of technology and the gradual improvement of regulatory frameworks, cryptocurrencies such as Bitcoin are expected to play a more important role in the global financial system. Although they may still face various challenges and fluctuations in the short term, their status as important financial instruments in the digital age has already been preliminarily established.

In this era full of uncertainty, digital assets like Bitcoin are redefining our understanding of currency, value storage, and financial systems. While the road may be fraught with challenges, the historical significance and potential value of this transformation cannot be ignored.