The stock price of US$1 billion is inflated. What impact did the previous international war have on Bitcoin?

Author: shu, BlockBeats

On June 13, an alarm sounded across Israel, launching a preemptive strike against Iran. Israeli Defense Minister Katz declared a national emergency, saying that after Israeli attacks on Iran, missile and drone attacks against Israel and its civilians are expected in the near future.

After the conflict broke out, Bitcoin fell below $102,000 in a short time, a 24-hour decline of 5%; Ethereum fell below $2,500 in a short time, a 24-hour decline of 9%.

According to Coinglass data, after the Israeli attack on Iran broke out, US$1 billion in the entire network in the past 12 hours, of which US$937 million were long and US$67.71 million were short.

The war broke out in the Middle East again, and the cryptocurrency market also shook violently. Local wars have occurred from time to time in the past few years. For Bitcoin, every conflict means a test of risk aversion attributes and a drastic fluctuation in market sentiment.

Russia-Ukraine War

As the Russian-Ukraine War broke out in 2022, the role of cryptocurrencies in safe-haven assets, value transfer tools and political fund mobilization methods were completely amplified.

On February 17 of that year, before the conflict with Russia, Ukraine announced the legalization of Bitcoin.

On February 24, Putin announced a "special military operation" against Ukraine, and the price of Bitcoin fell sharply, and global stock markets and cryptocurrencies ushered in Black Thursday. As of 18:00 on February 24, Bitcoin plummeted from about $39,000 to $35,094.2, down 10% in 24 hours and 20.4% in seven days.

Under the influence of market expectations that sanctions may drive Russian funds to cryptocurrencies, Bitcoin once stood at $45,000 after a sharp drop. However, when reports were reported that Ukrainian nuclear power plant was attacked, Bitcoin fell back to around $41,000.

At that time, the computing power and trading volume of Bitcoin in Ukraine and Russia accounted for a small proportion of the global total. In terms of computing power, there are rumors that Ukraine's largest Bitcoin mine was hit by Russian missiles, and the mine was offline, and the computing power dropped by 33%. However, according to the data of the masters on Ouke Cloud Chain, there was no major change in the computing power of Bitcoin across the entire network at that time. Therefore, the Russian-Ukraine war itself is not enough to cause huge fluctuations in the Bitcoin market from a technical perspective, and the more factors lie in the market itself.

Russia’s invasion of Ukraine is known as the “first crypto war in the world” because both sides have discovered the advantage of a currency that has no borders and no recognition. In this Russian-Ukrainian crisis, cryptocurrencies have become important highlights as a means of donation and payment, which has aroused a lot of support on Twitter.

On February 26, just two days after the war began, the Ukrainian government announced the official donation address of BTC, ETH and USDT on the same day, and announced that it would accept cryptocurrency donations, with thousands of people donating millions of dollars in cryptocurrencies to help Ukraine fight Russia. Crypto Twitter has also mobilized to raise funds for Ukraine, and Pussy Riot founder, Trippy Labs, and PleasrDAO members launched the "Ukrainian DAO" and is working to help those who have been hurt by the invasion.

The Israeli-Palestinian conflict

On October 7, 2023, the Palestinian armed group Hamas confronted the Israeli Defense Forces, and a round of Pakistan-Israel military conflict officially began. After the conflict broke out, the price of Bitcoin plunged to $27,000 in a short time. As of October 15, the Israeli-Palestinian conflict killed more than 4,000 people.

After the war broke out, both Palestinian and Israel tried to raise funds through cryptocurrencies for military spending, rescue, etc. Among them, the Israeli crypto community established Crypto Aid Israel, and the Palestinian side also raised funds through cryptocurrencies.

The decline in Bitcoin price did not recover until a week later. The most important reason is the fake news tweet of "US SEC Approval of BlackRock's iShares Bitcoin Spot ETF" released by crypto media Cointelegraph on the evening of October 16.

Armed conflicts continued throughout October, but the price of Bitcoin fluctuated and rose during the escalation of the conflict, and the reasons behind it were mainly reflected in three levels. First, the market's "immunity" to regional conflicts has gradually formed. Bitcoin is a global asset and historic response to regional conflicts is often limited unless the war escalates into a global crisis (such as the early stages of the Russian-Ukrainian War). Although the conflict between Palestine and Israeli conflict is fierce, the geographical scope is relatively narrow, and the market regards it as a "non-systemic risk."

Secondly, the Middle East itself has been in an environment of financial instability and limited capital flows for a long time. The escalation of conflict has inspired regional funds to move safe-havenly through USDT or BTC, bringing actual buying support to Bitcoin.

Finally, October 2023 coincided with the decline in US inflation and the expectation of interest rates peaking increased. At the same time, expectations of spot Bitcoin ETFs approved continued to heat up, becoming the main macro background that drove the market upward. Even if there are local risk events, the liquidity environment is loose and the logic of institutional position building has not changed; for example, during the application period of BlackRock ETF, market risk preferences have already increased.

Looking back at the market performance in the last two geopolitical conflicts, we can find a clear pattern. News of sudden war often first triggers panic selling, which triggers on-chain leverage liquidation, forming a resonance decline between the technical and emotional aspects; and after the liquidation is cleared, the market may gradually stabilize or even rebound due to factors such as the return of safe-haven demand and improvement of macro liquidity expectations. This conflict between Israel and Iran may also be interpreted along a similar path.

Unlike traditional financial markets, crypto assets play a more complex role in the face of war. On the one hand, it is a highly volatile risk asset, first affected by emotions. On the other hand, it is also a borderless and censor-resistant financial instrument, and it often becomes the last free channel for funds in extreme events. Because of this, every geopolitical emergencies are not only a test of market sentiment, but also a stress test of the actual function of crypto assets.

Whether war will still trigger similar reactions may not lie in the intensity of the conflict itself, but in whether it touches the systemic risk threshold and whether it triggers a re-evaluation of global liquidity and confidence. But I hope that world peace and war will never become a regular variable in market fluctuations.