The investment logic and role evolution of Bitcoin under geopolitics from Ukraine to Iran

On June 13, 2025, Israel launched the "Operation Lion's Rise," attacking multiple cities, military bases, and nuclear facilities in Iran. Recently, Iran's largest cryptocurrency exchange, Nobitex, suffered a cyberattack by Israeli hackers, resulting in losses of tens of millions of dollars in stablecoins. Bitcoin quietly fluctuated amidst the turmoil, rising close to $110,000 before falling again. From the significant wars and conflicts that occurred between 2020 and 2025, we can observe Bitcoin's sensitive response to geopolitical events. 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 crypto market after past wars.

The Watershed Moment of the Russia-Ukraine Conflict

Market Turbulence in the Early Days of War

The Russia-Ukraine conflict fully erupted on February 24, 2022, with speculation that Russian funds would flow into cryptocurrencies like Bitcoin, causing Bitcoin's price to soar by 20%, briefly surpassing $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, as the war drove European natural gas prices to historic highs and the Federal Reserve was forced to initiate its most aggressive rate hikes in forty years, Bitcoin experienced a 65% crash in 2022. Although this decline cannot be entirely attributed to the war, the geopolitical uncertainty undoubtedly exacerbated market pessimism.

Data Source: bitscrunch.com

Interestingly, the prolonged nature of the war provided new narrative support for Bitcoin. The Ukrainian government raised millions of dollars in donations through cryptocurrencies, highlighting the unique value of digital currencies in a constrained traditional financial system. Meanwhile, facing Western sanctions, Russia also turned to cryptocurrencies to some extent as a tool to evade sanctions, further reinforcing Bitcoin's status as an alternative financial instrument.

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

Market Test of the Israel War

On October 7, 2023, the Israel-Gaza conflict erupted. 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 Gaza conflict in 2023, the weekly transfer volume of USDT surged by 440%, with stablecoins becoming the new infrastructure. Since the start of the Israel-Hamas conflict, there has been no significant fluctuation in digital asset prices. This relative stability reflects a reduced sensitivity of the cryptocurrency market to geopolitical events.

Iran-Israel Conflict

In April 2024, during the Iran-Israel conflict, on the day of missile strikes, Bitcoin's volatility was only ±3%, less than one-third of that during the initial days of the Russia-Ukraine war in 2022. BlackRock's ETF saw a net inflow of $420 million in a single day, forming a buffer against volatility. The average daily trading volume of spot ETFs accounted for 55%, diluting the war sentiment with institutional order flow.

According to bitsCrunch data, even amid significant geopolitical events such as Israel's airstrikes on Iran, the Bitcoin market did not exhibit panic mode. Although Bitcoin fell by 4.5% to $104,343 within the first 24 hours of the war's onset in June 2025, and Ethereum dropped by 8.2% to $2,552, this decline was still manageable relative to the severity of the event, demonstrating strong resilience.

However, according to the Geopolitical Risk (GPR) index, we find that the index is currently on an upward trend, around 158. The last 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" events. The higher the geopolitical risk, the lower the investment, stock prices, and employment rates. The higher the geopolitical risk, the greater the probability of economic disasters and the greater the downside risk to the global economy.

Data Source: bitscrunch.com

The Best Window to Observe Capital Logic

The moment a ceasefire agreement is signed often serves as 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, with the Federal Reserve's monthly $120 billion bond-buying program continuously nourishing 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 rate hike, causing Bitcoin to drop by 12%.

Data Source: bitscrunch.com

On the day of the temporary ceasefire between Israel and Hamas in November 2023, the crypto derivatives market saw $210 million in liquidations. The BTC to EGP exchange rate on the Egyptian OTC market saw a premium drop from 8.2% to 2.1%, indicating a gradual retreat of demand in 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 ceasefire and a proposal for prisoner exchange. According to bitsCrunch data, Bitcoin surged, breaking through $100,000 before falling again. The market performance during the Middle East conflict prompted a reevaluation of Bitcoin's safe-haven asset attributes—Bitcoin and Ethereum can no longer be viewed as safe-haven assets in the gold market.

Entering the Institutional Era

The wartime value of digital assets has not disappeared but has been reconstructed in a contextualized manner. The Ukrainian government received $127 million in crypto donations, accounting for 6.5% of its early international aid; the underground network in Gaza maintained communication networks through Bitcoin mining machines; Iranian oil traders used mixers to break sanctions… These real applications in the margins are forming a parallel dark-line ecosystem alongside 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 formed a clear war response mechanism: 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 flowed into the crypto space, a number that may further shrink in the ETF era.

The real turning point lies in monetary policy. When the Federal Reserve opens the door to interest rate cuts, the signing of ceasefire agreements will become an accelerator for capital inflows. On June 18, 2025, U.S. interest rate futures reflected a 71% probability of a Federal Reserve rate cut in September, up from 60% before the announcement, with a slight increase in the probability of a September rate cut. However, if the war leads to disruptions in the energy supply chain, even if the conflict subsides, the shadow of stagflation will still suppress the crypto market. Monitoring the Federal Reserve's interest rates remains a top priority.

Post-War Recovery Patterns in the Crypto Market

From the conflicts that have ended, the conclusion of wars typically brings about a gradual recovery of market confidence. For the Bitcoin market, the advancement of peace processes usually 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 like Bitcoin.

If Bitcoin demonstrates good risk resilience during wartime, 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 status in the eyes of institutional investors.

Conclusion

Looking ahead, as technology continues to advance and regulatory frameworks gradually improve, cryptocurrencies like Bitcoin are expected to play an increasingly important role in the global financial system. Although various challenges and fluctuations may still be faced in the short term, its status as an important financial tool in the digital age has already been preliminarily established.

In this era full of uncertainties, 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 overlooked.