Oil Surge Rattles Bitcoin’s Nerves
Bitcoin’s price tumbled more than 3.5% to below $67,000 this week, as escalating tensions in the Middle East sent shockwaves through global markets. Iran’s threat to close the Strait of Hormuz—a route responsible for about 20% of the world’s oil supply—sent Brent crude prices soaring over 13% in just five days. The ripple effects were immediate: freight costs for large oil tankers reached all-time highs, and shipping rates for both crude and liquefied natural gas surged after several vessels were targeted and operators suspended activity.
On paper, Bitcoin is often touted as a hedge against geopolitical risk, but this time, it slid alongside traditional assets as oil’s rally stoked inflation fears and market uncertainty.
Middle East Tensions Hit Crypto Hard
The selloff in crypto was triggered by a series of events over the weekend, including a U.S. strike on Iran and subsequent Israeli strikes on Tehran and Beirut. The U.S. embassy in Riyadh was also reportedly hit by two Iranian drones. As headlines broke, Bitcoin initially rallied to $70,000 on Monday before dropping sharply to $66,500 within a day. Ether followed suit, and altcoins such as ADA, ZEC, and DASH lost upwards of 4% since midnight UTC.
Altcoins including ADA, ZEC, and DASH each lost more than 4% since midnight UTC on Tuesday.
QCP Capital reported that roughly $300 million in long positions were liquidated as prices fell. While analysts at QCP described this deleveraging as more orderly compared to earlier episodes this year, the speed of the drop caught many traders off guard.
It’s unclear how long this volatility will last.
Dollar Strength Adds to Bitcoin Slide
Adding to the pressure on crypto markets was a surge in the U.S. dollar index (DXY), which rose by 0.5% since midnight UTC—reaching its highest level since January 19. The stronger dollar put downward pressure not only on Bitcoin but also on U.S. equities and precious metals. The Invesco QQQ ETF was down about 2% in pre-market trading after closing slightly higher earlier in the week, while gold briefly touched a one-month high of $5,410 before falling back to $5,260.
Meanwhile, U.S. Treasury yields climbed above 4%, with the benchmark 10-year note pushing toward 4.1%. A rising dollar typically signals investors are seeking safety amid uncertainty, but this time even traditional safe havens like gold saw a retreat after an initial spike.
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Liquidations Stack Up as Bitcoin Drops
According to coindesk.com, about $300 million worth of long positions were wiped out during the initial wave of selling triggered by Middle East headlines over the weekend. This flush-out came as one-day implied volatility in Bitcoin options markets spiked to 93%, only to retrace quickly afterward—a sign that traders were bracing for wild swings but then recalibrated as conditions stabilized somewhat.
Sygnum CIO Fabian Dori noted that a short-term liquidity squeeze is driving crypto’s current slump and warned there could be further downside ahead if tensions persist or escalate further.
ETF Inflows Defy Market Gloom—For Now
Despite the turmoil across markets and Bitcoin’s price dip below $67,000, U.S. spot bitcoin ETFs recorded one of their strongest inflow days of the quarter—pulling in $458 million on Tuesday alone. Over three consecutive sessions last week, these ETFs added $1.1 billion in fresh capital according to SoSoValue data, with BlackRock’s IBIT accounting for roughly half that sum.
This robust ETF demand stands out against broader risk aversion: while crypto prices fell and equities like Coinbase dropped 5%, investors continued allocating funds through regulated products. Whether these inflows can offset persistent macro headwinds remains uncertain given ongoing conflict and market volatility.
What could shape the next move
If U.S. spot bitcoin ETFs continue to see strong inflows—such as the $458 million recorded on Tuesday despite Middle East tensions—bitcoin could stabilize above $68,000 in the immediate term; however, if Iran acts on its threat to close the Strait of Hormuz, which carries roughly one-fifth of global oil supply, further price declines remain possible but are not yet confirmed.