How does war affect Bitcoin? A deep analysis of the price trajectory over five years.

In the early hours of June 13, 2025, Israel launched Operation Lion Rising, attacking several Iranian cities, military bases, and nuclear facilities. Recently, Nobitex, Iran’s largest crypto exchange, was attacked by Israeli hackers, causing tens of millions of dollars in stablecoin losses. Bitcoin quietly fluctuated in the smoke of gunfire, rising all the way to nearly $110,000 before falling again. From a number of major wars and conflicts that took place between 2020 and 2025, we can observe the sensitive reaction of the Bitcoin price to geopolitical events. This article will provide an in-depth analysis of the impact of major wars and conflicts on Bitcoin’s price movements over the past five years, as well as the recovery trajectory of the crypto market after past wars.

The watershed moment of the Russia-Ukraine conflict

Market Fluctuation at the Beginning of the War

The Russia-Ukraine conflict fully erupted on February 24, 2022, and external speculation suggested that Russian funds would flow into cryptocurrencies such as Bitcoin. The price of Bitcoin soared 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 cryptocurrencies.

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

Data source: bitscrunch.com

Interestingly, the ongoing war has provided a new narrative support for Bitcoin. The Ukrainian government has raised millions of dollars in donations through encryption, highlighting the unique value of digital currency in the context of constraints in the traditional financial system. At the same time, in the face of Western sanctions, Russia has also turned to encryption to some extent as a tool to evade sanctions, further reinforcing Bitcoin’s position as an alternative financial tool.

It is worth noting that in 2014, Bitcoin entered a prolonged 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.

Israel War’s market test

Short-term impact and quick 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, 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 start of the Israel-Hamas conflict, there has not been a significant fluctuation in digital asset prices. This relative stability reflects a decreased sensitivity of the crypto market to geopolitical events.

Iran Israel conflict

In April 2024, during the Iran-Israel conflict, on the day of the missile attack, Bitcoin’s fluctuation was only ±3%, less than 1/3 of the level during the Russia-Ukraine war in 2022. BlackRock’s ETF saw a net inflow of $420 million in a single day, forming a volatility buffer. The average daily trading volume of spot ETFs accounted for 55%, with war sentiments diluted by institutional order flow.

According to bitsCrunch data, even in the face of significant geopolitical events such as Israel’s airstrikes on Iran, the Bitcoin market has not entered a panic mode. Although Bitcoin fell by 4.5% to $104,343 within the first 24 hours of the war starting 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 for now, the index is trending upwards, around 158. The previous time node of more than 150 was at the beginning of 2024. This index was constructed by Dario Caldara and Matteo Iacoviello. The Geopolitical Risk (GPR) Index peaked around the interwar period, in the early days of the Korean War, during the Cuban Missile Crisis, and after 9/11. The higher the geopolitical risk, the lower the investment, share price, and employment rate. The higher the geopolitical risk, the higher the probability of economic catastrophe and the greater the downside risk to the global economy.

Data source: bitscrunch.com

The best window to observe capital logic

The moment the ceasefire agreement is signed is often the best window to observe capital logic. When 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’s monthly $120 billion bond-buying program continued to irrigate risk assets. 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 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 blew up $210 million. The exchange rate premium of BTC against the Egyptian pound on the OTC exchange fell from 8.2% to 2.1%, and demand in war-torn areas gradually ebbed. The war narrative was quickly overshadowed by the original narrative of ETF approvals and halving cycles. On January 15, 2025, Israel and Hamas agreed to a truce and a proposal for a prisoner exchange. Bitcoin then rose in a straight line, breaking through $100,000 again and then falling. The performance of the market during the conflict in the Middle East has prompted a re-examination of Bitcoin’s safe-haven attributes – Bitcoin and Ethereum cannot yet be considered safe havens 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 merchants use mixers to break through sanctions… These real applications in the margins are forming a dark line ecosystem that runs 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 established a clear war response mechanism: crude oil prices trigger inflation alarms, the VIX panic index, and open interest on Deribit, among others. According to bitsCrunch data, less than 5% of the safe-haven funds released from geopolitical conflicts ultimately flow into the crypto space, and this figure may shrink further 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 reflected a 71% probability of the Fed cutting rates in September, up from 60% before the statement was released, with a slight increase in the probability of a rate cut in September. 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. Paying attention to the Fed’s interest rates remains a top priority.

The recovery pattern of the crypto market after the war.

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 resurgence in risk appetite often benefits the price performance of risk assets like Bitcoin.

If Bitcoin demonstrates good risk resistance during the war, institutional investors may increase its weight in their portfolios. Conversely, if it performs poorly, it may face pressure from capital outflows. From recent performance, Bitcoin’s relative stability during geopolitical crises may enhance its position in the eyes of institutional investors.

Conclusion

Looking ahead, with continuous technological advancements 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 position as important financial tools 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.