War and Bitcoin: How Crypto Markets Have Recovered After Each Major Geopolitical Conflict in History?

On February 28, 2026, as the US-Iran conflict escalated, the global financial markets faced an extreme test of geopolitical pressure once again. Bitcoin briefly dropped from over $90,000 to a low of $60,000 within just a few days, but by March 17, BTC had strongly recovered to the $74,000 level. This scene reminded the market of the situation after the full outbreak of the Russia-Ukraine conflict in February 2022—Bitcoin experienced a sharp decline followed by a rapid rebound, forming a classic “V-shaped” reversal.

Both events exhibited a three-stage pattern of “panic selling—quick recognition—funds replenishment,” seemingly echoing history on the surface. However, a deeper analysis of the macro background and market structure of these two conflicts reveals that the endogenous drivers of this price rebound have undergone profound changes.

Why does Bitcoin always experience “panic selling” at the start of a war?

When markets face sudden geopolitical shocks, Bitcoin often becomes the first target of “liquidity extraction.” On the day the conflict broke out on February 28, 2026, Bitcoin briefly fell to $63,000 within 24 hours, with the total cryptocurrency liquidation exceeding $1.1 billion. This is similar to Bitcoin dropping over 10% on the day the Russia-Ukraine war began on February 24, 2022.

The core of this “initial drop” mechanism lies in Bitcoin’s high liquidity and 24/7 trading features. When such extreme uncertainty events like war occur, both institutional and individual investors need to quickly replenish cash liquidity or meet margin calls. As the only global asset class that can be instantly liquidated around the clock, Bitcoin acts as an “automatic teller machine”—being sold first and also the first to undergo risk re-pricing. Notably, academic research confirms that before the outbreak of war, cryptocurrency networks tend to show high correlation, possibly due to investors’ conflicting expectations and preemptive position adjustments.

From “following the decline” to “leading the rally”: what changes have occurred in Bitcoin’s safe-haven properties?

In the early stages of the Russia-Ukraine conflict in 2022, Bitcoin did not exhibit safe-haven characteristics; its price movements were highly synchronized with risk assets. However, during the 2026 US-Iran conflict, Bitcoin showed a significant divergence from gold and stocks, demonstrating strong performance. Data shows that since the conflict began, Bitcoin has risen over 11%, while the S&P 500 has fallen about 3%, and gold has declined roughly 5%.

This divergence reflects a structural shift in market perception of Bitcoin’s attributes. Bitcoin is evolving from a pure “risk asset” into an “alternative tool” for hedging specific risks. In this conflict, Iran’s threat to block the Strait of Hormuz triggered a surge in oil prices, intensifying concerns about “stagflation.” In this environment, Bitcoin’s features—non-sovereign, fixed supply, inability to be frozen—are increasingly viewed by some funds as a hedge against fiat currency devaluation and the fragility of traditional financial systems, rather than merely a war hedge.

How has the spot ETF changed market resilience during wartime?

The approval of the US spot Bitcoin ETF in early 2024 marks a key structural difference during this conflict compared to the Russia-Ukraine war period. Large-scale institutional participation through compliant channels has provided the market with an unprecedented “shock absorption” capacity.

This change was particularly evident during the market turbulence in early March 2026. When Bitcoin’s price fell back to around $63,000, it did not trigger a chain reaction of crashes but instead sparked strong institutional buying. Data shows that the iShares Bitcoin Trust (IBIT) under BlackRock saw about 1.5% capital inflow after the escalation, while the world’s largest gold ETF, SPDR Gold Shares (GLD), experienced about 2.7% outflow. The divergence in fund flows indicates that long-term allocation needs now view the price dip as a buying opportunity rather than a signal to retreat. The ETF channel allows institutional funds to systematically deploy even during traditional market closures through regulated pathways.

Which variable ultimately dominates the price trend: macro fundamentals or geopolitical risks?

Although geopolitical conflict is the immediate catalyst, the medium-term direction of Bitcoin still depends on macro liquidity expectations. The transmission chain of oil prices—inflation—interest rates has become the core logical pathway connecting war and Bitcoin prices.

In this conflict, the potential disruption of the Strait of Hormuz pushed oil prices above $100 per barrel. Rising energy prices reinforce inflation expectations, influencing the Federal Reserve’s monetary policy path. If markets anticipate that the Fed will be forced to maintain higher interest rates or even hike further, liquidity tightening will suppress all risk assets. Academic studies also confirm that movements in the US dollar index (DXY) have a significant negative impact on the network structure of cryptocurrencies, and oil volatility tends to increase market correlation. Therefore, while a ceasefire agreement is positive, if inflation pressures persist, the sustainability of the rebound will be challenged. The upcoming Federal Reserve meeting (March 17-18) will be a key factor in determining whether Bitcoin can hold above $73,000.

Three future scenarios: how will the market evolve after a ceasefire?

Based on historical patterns and current macro environment, there are three main scenarios for the market after the US-Iran conflict:

Scenario 1: Continued “historical pattern” of controlled conflict.
If the conflict remains contained, the market will continue to follow the “buy on dips” logic. Bitcoin may experience wide fluctuations at current levels, gradually digesting geopolitical risk premiums and slowly trending upward as risk appetite recovers. Past cases show that after the 2020 Nagorno-Karabakh war ended, Bitcoin nearly doubled within 30 days, but this pattern heavily depended on the then-prevailing loose monetary policy.

Scenario 2: Spillover risk leading to a “second bottom.”
If the conflict causes oil prices to spike uncontrollably, prompting major central banks to maintain hawkish stances, macro liquidity pressures will outweigh micro resilience. In this case, Bitcoin may not escape unscathed and could face a second dip along with risk assets.

Scenario 3: Paradigm shift towards “accelerated adoption.”
If the conflict becomes prolonged, triggering a crisis of confidence in the US dollar system and national fiat currencies, Bitcoin’s role as a “non-sovereign store of value” will be amplified. Funds may shift from US Treasuries and gold to Bitcoin, accelerating its adoption and leading to a breakout from traditional correlation patterns.

Potential risks: what factors could disrupt the current recovery?

Three key risks could undermine the current recovery:

1. Energy supply chain disruptions.
   If the Strait of Hormuz remains blocked long-term, keeping oil prices above $100 per barrel, inflation driven by energy costs will force global central banks to reconsider easing policies, directly suppressing crypto valuations.

2. Dollar liquidity siphoning effect.
   During conflicts, the US dollar index often strengthens due to safe-haven demand. Since Bitcoin is dollar-denominated, a strong dollar increases the cost for holders of other fiat currencies, potentially suppressing demand temporarily.

3. Derivatives market structure risks.
   Currently, there is a large gamma exposure around $75,000 in options markets. Market makers’ hedging activities near this level could create a “magnetic effect.” If prices cannot break through effectively, it may trigger renewed volatility.

Summary

Reviewing Bitcoin’s performance since the 2026 US-Iran conflict, its “sharp decline followed by rapid rise” pattern closely resembles that of the 2022 Russia-Ukraine war. However, the internal drivers have fundamentally changed. The deep institutional involvement enabled by spot ETFs has enhanced market “shock absorption” capacity, transforming Bitcoin from a mere risk asset into an alternative tool for hedging specific risks. Nonetheless, the geopolitical impact still propagates through the “oil price-inflation-interest rate” chain to macro fundamentals. For investors, understanding these “similarities within differences” and closely monitoring Fed policy signals and the situation in the Strait of Hormuz are more meaningful than simply applying historical templates.

FAQ

Q1: Why does Bitcoin usually fall first when a war breaks out?
A: Mainly because of Bitcoin’s high liquidity. During sudden geopolitical crises, investors tend to sell the most liquid assets first to raise cash or meet margin calls. Bitcoin’s 24/7 trading makes it the first to be sold and the first to reprice risk.

Q2: Is Bitcoin a safe-haven or risk asset during war?
A: Market perception is evolving. During the current US-Iran conflict, Bitcoin has outperformed gold and stocks, showing resilience different from previous patterns. It is neither purely a safe-haven nor a risk asset but is increasingly seen as an alternative tool to hedge specific risks like fiat devaluation and financial system fragility.

Q3: How has Bitcoin historically performed after wars end?
A: Historical patterns show that after ceasefire agreements, geopolitical risk premiums tend to fade, and market risk appetite recovers, generally benefiting Bitcoin. However, the ultimate trajectory depends on macro policy conditions. For example, after the 2020 Nagorno-Karabakh war, Bitcoin surged due to loose policies, whereas during the 2022 Russia-Ukraine negotiations, it declined amid rate hike expectations.

Q4: What are the key differences between this US-Iran conflict and the Russia-Ukraine war?
A: The most significant difference is in market structure. After the early 2024 approval of a US spot Bitcoin ETF, institutional funds can allocate Bitcoin through compliant channels, creating a stronger “volatility buffer.” Additionally, this conflict directly affects global oil markets, influencing inflation expectations differently.