How does war affect Bitcoin? A deep analysis of the five-year price trajectory

In the early morning of June 13, 2025, Israel launched Operation Lion Rise, attacking several Iranian cities, military bases and nuclear facilities. Recently, Iran's largest crypto exchange Nobitex was hacked by Israeli hackers, resulting in tens of millions of dollars in stablecoin losses. Bitcoin fluctuated quietly in the smoke, rising all the way to nearly $110,000 before falling again. From the many major wars and conflicts that occurred between 2020 and 2025, we can observe the sensitivity of Bitcoin prices to geopolitical events. This article will deeply analyze the impact of major wars and conflicts on Bitcoin price trends in the past five years, as well as the recovery trajectory of the crypto market after the end of past wars.

A watershed moment in the Russia-Ukraine conflict

Market shocks during the early stages of the war

The Russian-Ukrainian conflict broke out on February 24, 2022. There was speculation that Russian funds would flow into cryptocurrencies such as Bitcoin, and the price of Bitcoin soared by 20%, breaking through $45,000 at one point. At the same time, Russian oligarchs tried to transfer frozen assets through Bitcoin, which seemed to confirm the "crisis value" of cryptocurrencies.

However, in the long run, when the war pushed up European natural gas prices to a historic peak and the Federal Reserve was forced to launch the most aggressive interest rate hike in four decades, Bitcoin staged a 65% crash in 2022. Although this decline cannot be attributed entirely to the war, geopolitical uncertainty has undoubtedly exacerbated market pessimism.

 Data source: bitscrunch.com

Interestingly, the persistence of the war has provided new narrative support for Bitcoin. The Ukrainian government has raised millions of dollars in donations through cryptocurrencies, highlighting the unique value of digital currencies in the context of the constraints of the traditional financial system. At the same time, in the face of Western sanctions, Russia has also turned to cryptocurrencies as a tool to circumvent sanctions, which further strengthens Bitcoin's position as an alternative financial tool.

It is worth noting that in 2014, Bitcoin fell into a long bear market after Russia invaded Ukraine. However, by 2022, Bitcoin has grown into a larger, stronger, and more accepted asset class by institutional investors.

Israel's war on markets

Short-term shock and rapid recovery

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

Since the start of the Israel-Hamas conflict, digital asset prices have not experienced significant volatility. This relative stability reflects the cryptocurrency market’s reduced sensitivity to geopolitical events.

Iran-Israel conflict

In April 2024, during the Iran-Israel conflict, the Bitcoin volatility was only ±3% on the day of the missile attack, less than one-third of the 2022 Russia-Ukraine war. BlackRock ETF had a net inflow of $420 million in a single day, forming a volatility buffer. Spot ETFs accounted for 55% of the daily average trading volume, and the war sentiment was diluted by institutional order flows.

Data from bitsCrunch shows that even in major geopolitical events such as Israel's air strikes on Iran, the Bitcoin market has not entered panic mode. Although Bitcoin fell 4.5% to $104,343 and Ethereum fell 8.2% to $2,552 in the first 24 hours of the war in June 2025, this decline was still controllable relative to the severity of the incident, showing strong resilience.

However, according to the Geopolitical Risk (GPR) Index, we found that, for now, the index is on an upward trend, around 158. The previous time point of exceeding 150 was in early 2024. This index was constructed by Dario Caldara and Matteo Iacoviello. The Geopolitical Risk (GPR) Index peaked before and after the two world wars, in the early days of the Korean War, during the Cuban Missile Crisis, and after the September 11th incident. The higher the geopolitical risk, the lower the investment, stock prices and employment rates. The higher the geopolitical risk, the higher the probability of economic disasters and the greater the downside risks to the global economy.

 Data source: bitscrunch.com

The best window to observe capital logic

The moment when a ceasefire agreement is signed is often the best window to observe the logic of capital. The Nagorno-Karabakh War ended in November 2020, and Bitcoin nearly doubled in the following 30 days. The reason why this territorial dispute between a small Caucasian country detonated the crypto market is that the war did not change the global easing tone, and the Fed's monthly bond purchase plan of $120 billion continued to irrigate risky assets. Mirroring this is the March 2022 Russia-Ukraine negotiations, where the brief ceasefire hope was shattered by the Fed's announcement of a 50 basis point rate hike, and Bitcoin fell 12% in response.

 Data source: bitscrunch.com

On the day of the temporary ceasefire between Israel and Palestine in November 2023, the crypto derivatives market was liquidated by $210 million. The premium of the BTC/Egyptian pound exchange rate in Egypt's OTC exchange fell from 8.2% to 2.1%, and demand in war-torn areas gradually receded. The war narrative was soon covered by native narratives such as ETF approval and halving cycles. On January 15, 2025, Israel and Hamas agreed to a ceasefire and exchange of prisoners. Bitcoin then rose straight up, breaking through $100,000 again before falling. The market performance during the Middle East conflict prompted people to re-examine Bitcoin's safe-haven asset attributes - Bitcoin and Ethereum cannot yet be regarded as safe haven assets in the gold market.

Entering the Institutional Era

The war value of digital assets has not disappeared, but is being reconstructed in a scenario-based manner. The $127 million in crypto donations received by the Ukrainian government accounted for 6.5% of its early international aid; the Gaza underground network maintained its communication network through Bitcoin mining machines; Iranian oil traders used mixers to break through sanctions... These real applications in marginal areas are forming a dark ecosystem that is parallel to Wall Street. While the mainstream market focuses on ETF fund flows, the demand for cryptocurrencies in war-torn areas 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, VIX panic index, and open contracts on Deribit, etc. BitsCrunch data shows that less than 5% of the safe-haven funds released by geopolitical conflicts eventually flow into the crypto field, and this figure may shrink further in the ETF era.

The real turning point lies in monetary policy. When the Fed opens the channel for interest rate cuts, the signing of the ceasefire agreement will become an accelerator for capital inflows. On June 18, 2025, the US interest rate futures price reflected a 71% probability of a September rate cut by the Fed, compared with 60% before the announcement. The probability of a September rate cut has increased slightly. However, if the war causes a disruption in the energy supply chain, even if the war subsides, the shadow of stagflation will still suppress the crypto market. Paying attention to the Fed's interest rate is still a top priority.

Post-war crypto market recovery model

Judging from the conflicts that have ended, the end of the war usually brings about a gradual recovery of market confidence. For the Bitcoin market, the advancement of the peace process usually reduces the geopolitical risk premium, making investors more willing to take risks. This recovery in risk appetite is often conducive to the price performance of risky assets such as Bitcoin.

If Bitcoin demonstrates good risk resistance during the war, institutional investors may increase its weight in their portfolios. On the contrary, if it performs poorly, it may face pressure for capital outflow. Judging from its recent performance, Bitcoin's relative stability during geopolitical crises may enhance its status in the minds of institutional investors.

Conclusion

Looking ahead, with the continuous advancement of technology and the gradual improvement of the regulatory framework, cryptocurrencies such as Bitcoin are expected to play a more important role in the global financial system. Although it may still face various challenges and fluctuations in the short term, its status as an important financial tool in the digital age has been initially established.

In this era of uncertainty, digital assets such as Bitcoin are redefining our understanding of money, value storage, and financial systems. Although the road may be challenging, the historical significance and potential value of this change cannot be ignored.