$1 Billion Liquidated: What Is the Impact of Recent International Conflicts on Bitcoin?

On June 13, alarms sounded throughout Israel as preemptive strikes were launched against Iran. Israeli Defense Minister Katz declared a nationwide state of emergency, stating that following Israel's attack on Iran, missile and drone strikes targeting Israel and its civilians are expected in the near future.

After the conflict erupted, Bitcoin briefly dipped below $102,000, recording a 5% drop over 24 hours; Ethereum also briefly fell below $2,500, experiencing a 9% decline over 24 hours.

According to data from Coinglass, following Israel's assault on Iran, the total liquidations across the market in the past 12 hours reached $1 billion, including $937 million in long liquidations and $67.71 million in short liquidations.

Once again, war breaks out in the Middle East, causing significant turmoil in the cryptocurrency market. Over the past few years, localized conflicts have occurred periodically, and for Bitcoin, each conflict represents a test of its safe-haven property and the intense volatility of market sentiment.

The Russia-Ukraine War

During the outbreak of the Russia-Ukraine war in 2022, the role of cryptocurrencies as safe-haven assets, tools for value transfer, and instruments for political funding was amplified significantly.

On February 17 of that year, prior to the escalation of tensions with Russia, Ukraine announced the legalization of Bitcoin.

On February 24, Putin announced the commencement of a "special military operation" against Ukraine, leading to a sharp decline in Bitcoin prices. Global stock markets and cryptocurrencies faced a "Black Thursday." As of 6:00 PM on February 24, Bitcoin plummeted from approximately $39,000 to $35,094.2, recording a 24-hour drop of 10% and a seven-day decline of 20.4%.

Amid market speculation that sanctions might drive Russian capital inflows into cryptocurrencies, Bitcoin rebounded after the initial crash, briefly crossing $45,000. However, reports of Ukraine’s nuclear power plant being attacked caused Bitcoin to retreat again to around $41,000.

At the time, the share of Bitcoin hashrate and trading volume in Ukraine and Russia relative to global totals was quite small. Regarding hashrate, there were rumors of Ukraine's largest Bitcoin mining farm being hit by Russian missiles, leading to its shutdown and a 33% drop in hashrate. However, according to on-chain data from OKLink’s Master Explorer, Bitcoin’s total network hashrate experienced no significant changes during that period. Thus, the Russia-Ukraine war itself was insufficient to cause massive technical disruptions to Bitcoin’s price action. The main factors driving the volatility were rooted in market dynamics.

The Russian invasion of Ukraine, often referred to as "the world's first crypto war," highlighted the benefits of borderless, permissionless currency for both sides. During the Russia-Ukraine crisis, cryptocurrencies emerged as a shining example of both a donation tool and a payment method, sparking massive support on Twitter.

On February 26, just two days after the war began, the Ukrainian government announced official donation addresses for BTC, ETH, and USDT, declaring that it would accept cryptocurrency contributions. Thousands of individuals donated millions of dollars in cryptocurrencies to help Ukraine fight against Russia. Crypto Twitter also rallied to raise funds for Ukraine, with contributions from Pussy Riot's founder, Trippy Labs, and PleasrDAO members who launched "Ukraine DAO" to assist those affected by the invasion.

Israel-Hamas Conflict

On October 7, 2023, following clashes between the Palestinian militant group Hamas and the Israeli Defense Forces, a new round of military conflict between Israel and Palestine officially broke out. After the conflict began, Bitcoin's price briefly plunged to $27,000. As of October 15, the Israel-Hamas conflict had resulted in over 4,000 fatalities.

Following the outbreak of war, both sides sought to leverage cryptocurrency to raise funds for military expenditures, humanitarian aid, and other purposes. Israel's crypto community established Crypto Aid Israel, while Palestinians also turned to cryptocurrencies for fundraising efforts.

Bitcoin's price decline only began to recover a week later, primarily due to a fake news tweet from crypto media outlet Cointelegraph on the evening of October 16, which falsely claimed that the U.S. SEC had approved BlackRock's iShares Bitcoin Spot ETF.

Throughout October, armed conflict continued to intensify, but Bitcoin's price saw an upward trajectory during the escalation. This trend can be attributed to three key factors. First, the market had gradually developed "immunity" to regional conflicts. Bitcoin, being a global asset, has historically shown limited reaction to regional crises unless they escalate into global-scale emergencies, such as the early phases of the Russia-Ukraine war. While the Israel-Hamas conflict was intense, its relatively localized geographic scope led the market to regard it as a "non-systemic risk."

Second, the Middle East has long been a region characterized by financial instability and restricted capital flows. The conflict’s escalation spurred regional capital to seek refuge in assets like USDT and BTC, providing tangible buy-side support for Bitcoin.

Finally, October 2023 coincided with a backdrop of declining inflation in the U.S., growing expectations that interest rates have peaked, and increasing anticipation of the approval of a spot Bitcoin ETF, all of which became the primary macro drivers behind the market's rise. Even if isolated risk events emerged, the liquidity environment remained accommodative, and institutional accumulation logic stayed intact. For instance, during the period of BlackRock's ETF application news, market risk appetite had already improved.

Looking back at the market's performance during the last two geopolitical conflicts, a clear pattern can be observed. Sudden news of war often triggers panic selling at first, which then leads to on-chain leveraged liquidations, resulting in a downward cascade driven by both technical and emotional factors. However, once the liquidations clear out, the market may stabilize or even rebound gradually, driven by safe-haven demand and improved macro liquidity expectations. The current conflict between Israel and Iran may potentially follow a similar trajectory.

Unlike traditional financial markets, the role of crypto assets in the face of war is more complex. On the one hand, they are highly volatile risk assets that are initially impacted by emotional shocks. On the other hand, they function as borderless and censorship-resistant financial tools, often becoming the last free channel for capital in extreme events. For this very reason, every unexpected geopolitical event serves not only as a test of market sentiment but also as a stress test for the practical utility of crypto assets.

Whether future wars will provoke similar reactions may ultimately depend less on the intensity of the conflict itself and more on whether it breaches the threshold of systemic risk, prompting a reevaluation of global liquidity and confidence. That said, we all hope for world peace, and may war never become a routine variable in market volatility.

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