Renewed fighting between Washington and Tehran triggers crypto sell-off
Bitcoin fell below $73,000 on Thursday to its lowest level since April 13 as U.S. strikes on southern Iran and subsequent retaliation from Iran’s Revolutionary Guards sent shockwaves through global financial markets.
The escalation dimmed expectations for a U.S.-Iran agreement that could stabilize the Strait of Hormuz, a critical oil shipping route. Kuwait, which hosts five U.S. bases, said it intercepted hostile drones and missiles during the exchange. Iran’s Revolutionary Guards said they retaliated by targeting the American base used to launch the attacks.
Oil markets responded immediately. Brent crude jumped 4%, trading near $96 per barrel, with futures climbing 2.52% to $96.67 a barrel according to Reuters. The geopolitical risk premium pushed investors toward safe-haven assets and away from riskier holdings, including Bitcoin.
Bitcoin’s price of $73,277.72 marked a significant retreat from recent highs. The cryptocurrency now trades below its 50-week exponential moving average of $84,000, with the next core support level at $68,000. The absence of RSI divergences on the weekly price chart indicates no clear directional bias.
Prediction markets reflected rapidly shifting expectations. Polymarket ceasefire odds peaked at 70% over the weekend but collapsed to just 8% for a permanent ceasefire by month’s end. The platform priced ceasefire odds at 42% by the end of next month, down from 76% previously.
Institutional crypto flows showed signs of stress. BlackRock’s iShares Bitcoin Trust saw a $527.84 million outflow on Wednesday, part of a broader $528 million exit from the fund. The product, which debuted in January 2024, has become a key barometer of institutional Bitcoin demand.
South Korea’s crypto sector also felt the pressure. Samsung Securities, Samsung Card, and Samsung SDS collectively hold a $408 million stake in Dunamu, South Korea’s biggest crypto exchange, representing 2% ownership through Samsung Securities and 1% each through Samsung Card and Samsung SDS.
Market liquidations accelerated. Long positions worth $897 million to $1 billion were wiped out as leverage collapsed across spot and derivatives venues. Ether futures open interest hit a record 16 million ETH, signaling elevated positioning ahead of the volatility.
Investors are also monitoring Thursday’s PCE report, the Federal Reserve’s preferred inflation gauge, which could add additional pressure or relief depending on the data. Treasury operations scheduled for May 28 to June 5 are expected to drain $150 billion in liquidity from markets.
Rony Szuster, head of research at Mercado Bitcoin, acknowledged the near-term headwinds. “In the short term, the market remains more sensitive to geopolitical developments and the return of institutional flows after the U.S. holiday, keeping bitcoin in consolidation while altcoins trade in a more selective environment,” Szuster said.
Yet Szuster tempered the bearish narrative on longer time horizons. “The crypto market remains structurally resilient, supported by long-term accumulation and the strength of AI and blockchain infrastructure narratives,” he added.
The sell-off underscores crypto’s sensitivity to macro risk-off events. While Bitcoin’s 12-year history shows recovery from geopolitical shocks, the immediate impact of U.S.-Iran tensions demonstrates that digital assets remain correlated with traditional markets during periods of acute uncertainty.
