Bitcoin slumped to a six-week low on Thursday as escalating geopolitical tensions between the United States and Iran triggered a broad risk-off selloff across global financial markets, wiping nearly $90bn from the cryptocurrency sector and unleashing one of the largest liquidation waves of the year.
The selloff reinforced how closely digital assets remain tied to global macro conditions despite industry claims that Bitcoin can function as a hedge against geopolitical and fiat-currency risks.
For global investors, the latest crypto rout highlights a broader reality: when geopolitical panic grips financial markets, liquidity and leverage often disappear faster than conviction.
Bitcoin slides as geopolitical tensions hit global risk appetite
According to market data from CoinMarketCap and Investing.com, Bitcoin fell more than 4.5 per cent during Asian and European trading hours, briefly dropping below the psychologically important $73,000 level before stabilising near $72,650.
Ethereum declined more than 6 per cent, while major altcoins including Solana, Avalanche and Dogecoin posted even steeper losses as traders aggressively reduced exposure to high-risk assets.
The broader cryptocurrency market lost nearly $90bn in value within hours, dragging total digital-asset capitalisation down to roughly $2.45tn. Ethereum dropped more than 6 per cent, Solana slid nearly 9 per cent, while several leveraged altcoins recorded double-digit losses during peak liquidation periods.
The selloff followed renewed military and diplomatic tensions involving the United States and Iran, which rattled commodity markets, pushed oil prices sharply higher and reignited fears of a wider regional conflict in the Middle East.
Brent crude futures climbed above $103 per barrel earlier in the session before paring gains, while investors simultaneously rushed into traditional safe-haven assets including US Treasuries, gold and the dollar.
The broader market selloff extended across global risk assets. Nasdaq futures fell roughly 1.4 per cent in premarket trading, while the CBOE Volatility Index, often referred to as Wall Street’s “fear gauge”, climbed above 24 points for the first time in weeks.
Gold briefly traded near record highs above $2,540 an ounce as investors rotated into traditional safe-haven assets, while the US Dollar Index strengthened against major currencies.
In bond markets, the benchmark US 10-year Treasury yield rose toward 4.6 per cent as traders reassessed inflation risks linked to higher energy prices and potential supply-chain disruptions.
Energy analysts note that the Strait of Hormuz — a narrow shipping corridor through which roughly one-fifth of global oil supplies pass daily — remains one of the world’s most strategically sensitive energy chokepoints.
Any prolonged disruption in the region could significantly impact inflation expectations, shipping costs and global monetary policy trajectories.
“The market is responding to geopolitical uncertainty rather than purely crypto-specific fundamentals,” said Ivan Patriki, co-founder of digital asset analytics platform QuantMap.
“Traders initially reacted to headlines suggesting possible diplomatic engagement, but sentiment deteriorated rapidly after renewed military developments increased fears of a prolonged conflict environment,” he said.
Crypto liquidations approach $1bn in 24 hours
The abrupt reversal triggered a violent deleveraging cycle across crypto derivatives markets, exposing the vulnerability of speculative positioning after weeks of relatively stable upward momentum.
Data from Coinglass showed that more than 165,000 leveraged traders were liquidated within 24 hours, with total forced liquidations reaching approximately $930m.
Long positions accounted for roughly $870m of the losses, reflecting the extent to which traders had positioned for continued price appreciation before geopolitical tensions intensified.
Bitcoin and Ethereum derivatives together represented more than half of total market liquidations.
Funding rates across major offshore exchanges also turned sharply negative, indicating a rapid deterioration in bullish market sentiment.
Aggregate Bitcoin futures open interest fell nearly 11 per cent during the selloff, according to derivatives platform data monitored by market participants, indicating that traders were rapidly closing leveraged positions rather than adding fresh bullish exposure.
Perpetual futures funding rates on Binance, Bybit and OKX also turned decisively negative, reflecting growing bearish sentiment among short-term traders. Analysts said the collapse in leverage suggests the market may remain vulnerable to additional volatility if geopolitical risks intensify further.
Crypto trading desks said volatility spiked particularly during US trading hours as algorithmic strategies accelerated sell pressure across perpetual futures markets.
One London-based crypto derivatives trader told Reuters-style market participants that several institutional desks rapidly reduced leveraged exposure after oil prices breached key resistance levels overnight.
“We saw aggressive unwinding from macro-driven funds once geopolitical headlines accelerated,” the trader said, requesting anonymity because of the sensitivity of client positioning. “The market became extremely one-sided very quickly.”
“Once key support levels broke, the market essentially entered cascading liquidation territory,” said Marcus Levin, head of research at digital asset firm CrossBridge Analytics.
“The scale of leverage embedded in the system meant relatively small macro shocks were capable of triggering outsized downside moves.”
Open interest across major crypto exchanges also declined significantly, suggesting traders were aggressively reducing leveraged exposure rather than rotating capital into alternative digital assets.
ETF outflows deepen pressure on digital assets
Institutional demand for Bitcoin also weakened considerably, adding another layer of pressure to the market.
Spot Bitcoin exchange-traded funds recorded net outflows of approximately $733m on May 27, according to data from SoSoValue, extending an eight-session withdrawal streak that has reversed part of the strong inflow momentum seen earlier this year.
BlackRock’s iShares Bitcoin Trust and Grayscale’s Bitcoin products both recorded notable reductions in net assets during the latest trading session.
The sustained withdrawals suggest institutional investors are becoming increasingly cautious about maintaining aggressive exposure to volatile digital assets during periods of geopolitical instability and elevated interest-rate uncertainty.
Analysts at Standard Chartered noted that crypto markets remain highly sensitive to broader liquidity conditions despite growing institutional adoption.
“Bitcoin continues to trade largely as a high-beta macro asset during periods of elevated uncertainty,” the bank said in a recent market note.
“When Treasury yields rise, oil prices spike and geopolitical tensions escalate simultaneously, risk assets typically struggle.”
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Oil prices and Treasury yields reshape crypto sentiment
The crypto correction also coincided with renewed upward pressure on US Treasury yields and energy markets.
The benchmark US 10-year Treasury yield climbed as investors reassessed inflation risks linked to higher oil prices and potential disruptions to global supply chains.
Rising crude prices have become a growing concern for central banks because sustained energy inflation could complicate efforts to ease monetary policy later this year.
For crypto markets, that dynamic creates a difficult environment.
Higher yields generally reduce the attractiveness of speculative assets that generate no cash flow, while tighter global liquidity conditions tend to weaken demand for leveraged risk trades.
Oil traders also warned that shipping insurance costs and tanker freight rates could rise sharply if tensions around the Strait of Hormuz intensify further.
Freight market data monitored by shipping analysts showed increased volatility in tanker pricing as insurers reassessed regional risk exposure.
“The market is beginning to price geopolitical risk premiums back into energy and shipping markets,” said Amrita Sen, co-founder of Energy Aspects.
“That has broader implications not only for oil prices but also for inflation expectations and investor positioning globally.”
Analysts warn volatility could intensify
Technical analysts say Bitcoin’s short-term structure remains fragile despite indications that the asset may be approaching oversold territory.
The Relative Strength Index on daily charts has fallen near levels historically associated with short-term exhaustion selling, though analysts caution that geopolitical headlines could continue driving extreme volatility.
If Bitcoin decisively breaks below current support around $72,000, traders say the next major psychological level sits near $70,000.
Below that, some analysts believe downside risks could extend toward the mid-$60,000 range if institutional outflows accelerate further.
However, market strategists also warn that sharp rebounds remain possible given the speed of recent liquidations.
“Crypto markets are still extremely headline-sensitive,” said Caroline Mauron, co-founder of Orbit Markets.
“If geopolitical tensions ease even temporarily, the market could see rapid short-covering rallies and volatility-driven rebounds.”
Still, analysts caution that broader structural risks remain elevated.
Previous geopolitical crises have repeatedly demonstrated that digital assets behave less like defensive stores of value and more like speculative technology-linked assets during periods of global financial stress.
That distinction continues to shape institutional portfolio allocation decisions.
Investors reassess crypto’s role during geopolitical shocks
The latest selloff is also forcing investors to re-evaluate Bitcoin’s evolving role within diversified portfolios.
While crypto advocates have increasingly promoted Bitcoin as “digital gold,” recent market behaviour suggests institutional investors still treat the asset primarily as a high-volatility growth trade tied closely to liquidity conditions and risk sentiment.
That debate has become increasingly important as pension funds, hedge funds and asset managers deepen exposure to crypto-linked investment products.
“The question for institutional investors is no longer whether crypto matters,” said Levin.
“It’s whether digital assets can mature into a true macro hedge or whether they remain primarily speculative instruments vulnerable to global liquidity shocks.”
For now, markets appear to be leaning toward the latter interpretation.
Several hedge-fund managers and proprietary trading firms have also reduced crypto exposure in recent sessions amid concerns that persistent oil-price volatility could tighten global liquidity conditions and delay expected Federal Reserve rate cuts, according to two digital-asset market participants familiar with institutional positioning flows.
Market strategists said correlations between Bitcoin, high-growth technology stocks and broader liquidity conditions remain historically elevated despite increased institutional adoption through exchange-traded funds.
As geopolitical uncertainty intensifies, investors across equities, commodities and digital assets are increasingly prioritising liquidity preservation, defensive positioning and capital protection over speculative risk-taking.
And in moments of global panic, crypto markets remain among the first places where fear is priced in aggressively.
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