How Does War Affect Bitcoin? A Deep Analysis of Price Trajectory Over Five Years

On June 13, 2025, Israel launched raids on multiple cities, military bases, and nuclear facilities in Iran. Recently, Iran's largest cryptocurrency exchange suffered a hacker attack, resulting in losses of tens of millions of dollars in stablecoins. Bitcoin experienced volatility during this conflict, briefly approaching $110,000 before falling again. From 2020 to 2025, we can observe Bitcoin's price sensitivity to geopolitical events amid several major wars and conflicts. This article will delve into the impact of major wars and conflicts over the past five years on Bitcoin's price trends, as well as the recovery trajectory of the cryptocurrency market following past wars.

The Watershed Moment of the Russia-Ukraine Conflict

Market fluctuations at the beginning of the war

The Russia-Ukraine conflict fully erupted on February 24, 2022, and there were speculations that Russian funds would flow into cryptocurrency, causing the price of Bitcoin to surge by 20%, briefly surpassing $45,000. At the same time, there were rumors that Russian oligarchs were attempting to transfer frozen assets through Bitcoin, seemingly confirming the "crisis value" of cryptocurrency.

However, in the long term, as the war drove European natural gas prices to historical peaks and the Federal Reserve was forced to initiate the most aggressive rate hikes in forty years, Bitcoin experienced a significant drop of 65% in 2022. Although this decline cannot be entirely attributed to the war, the geopolitical uncertainty undoubtedly exacerbated the market's pessimistic sentiment.

It is worth noting that the ongoing war has actually provided a new narrative support for Bitcoin. The Ukrainian government has raised a large amount of donations through cryptocurrency, highlighting the unique value of digital currency in the context of restrictions in 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, which further reinforces Bitcoin's position as an alternative financial instrument.

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

Market Test of the Israel War

Short-term Impact and Rapid Recovery

On October 7, 2023, the Israel-Gaza conflict broke out. On October 11, Bitcoin fell below $27,000, reaching 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, USDT transfer volume increased by 440% week-on-week, and stablecoins are becoming the new infrastructure.

Since the beginning of the Israel-Hamas conflict, the prices of digital assets have not shown significant fluctuations. This relative stability reflects a decreased sensitivity of the cryptocurrency market to geopolitical events.

Iran-Israel Conflict

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

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

However, based on the geopolitical risk (GPR) index, we find that, at present, the index shows an upward trend, around 158. The previous time it exceeded 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, during the early stages of the Korean War, during the Cuban Missile Crisis, and after the "9/11" incident. The higher the geopolitical risk, the lower the investment, stock prices, and employment rate. The higher the geopolitical risk, the greater the probability of economic disasters, and the greater the downside risk to the global economy.

The Best Window to Observe Capital Logic

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

On the day of the temporary ceasefire between Israel and Palestine in November 2023, the crypto derivatives market saw a liquidation of $210 million. The premium on the BTC to Egyptian Pound exchange rate in the Egyptian OTC market dropped from 8.2% to 2.1%, indicating a gradual decline in demand from war-torn areas. The narrative of war was quickly overshadowed by native narratives such as ETF approvals and halving cycles. On January 15, 2025, Israel and Hamas agreed to a proposal for a ceasefire and prisoner exchange. 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 safe-haven asset properties ------ 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 cryptocurrency 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 merchants use mixers to break through sanctions... These real applications in the margins are forming an underground ecosystem that runs parallel to Wall Street. While the mainstream market focuses on ETF fund flows, the demand for cryptocurrency 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 alerts, VIX panic index, and open interest contracts, among others. Data shows that 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 era of ETFs.

The real turning point lies in monetary policy. When the Federal Reserve opens the interest rate cut channel, the signing of the ceasefire agreement will become an accelerator for capital inflow. 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 statement was released, indicating a slight increase in the probability of a September rate cut. However, if the war causes a disruption in the energy supply chain, even if the conflict subsides, the shadow of stagflation will still suppress the cryptocurrency market. Paying attention to the Federal Reserve's interest rates remains a top priority.

Post-War Cryptocurrency Market Recovery Model

From the perspective of concluded conflicts, the end of war usually brings about a gradual restoration of market confidence. For the Bitcoin market, the advancement of the peace process 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 demonstrates good risk resistance during a war, institutional investors may increase its weight in their portfolios. Conversely, if it performs poorly, it may face pressure for capital outflows. From recent performance, Bitcoin's relative stability during geopolitical crises may enhance its position in the eyes of institutional investors.

Conclusion

Looking to the future, with the continuous advancement of technology and the gradual improvement of regulatory frameworks, cryptocurrencies such as Bitcoin are expected to play an increasingly important role in the global financial system. Although various challenges and fluctuations may still be encountered in the short term, their status as important financial tools in the digital age has already been preliminarily established.

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