How Geopolitical Conflicts Affect the Crypto Assets Market? An Analysis of Price Fluctuations Over the Past Five Years

In recent years, the global geopolitical situation has become increasingly tense, with several major conflicts significantly impacting the financial markets. This article will analyze the influence of major wars and conflicts on Bitcoin price trends from 2020 to 2025, as well as the recovery of the Crypto Assets market after the conflicts end.

Russia-Ukraine Conflict: A Watershed Moment for the Crypto Market

Market fluctuations in the early stages of war

On February 24, 2022, the Russia-Ukraine conflict fully erupted. The market anticipated that Russian funds might flow into Crypto Assets, with Bitcoin's price soaring by 20% at one point, breaking through $45,000. At the same time, reports emerged that Russian oligarchs were attempting to transfer frozen assets via Bitcoin, seemingly confirming the value of Crypto Assets during times of crisis.

However, in the long term, as the war drives up energy prices in Europe and forces the Federal Reserve to significantly raise interest rates, Bitcoin experienced a 65% drop in 2022. Although this decline cannot be entirely attributed to the war, the geopolitical uncertainty has undoubtedly exacerbated market pessimism.

Interestingly, the ongoing war has instead provided new narrative support for Bitcoin. The Ukrainian government has raised a significant amount of donations through Crypto Assets, highlighting the unique value of digital currency in situations where traditional finance is restricted. At the same time, in the face of Western sanctions, Russia has to some extent turned to Crypto Assets, further reinforcing Bitcoin's position as an alternative financial tool.

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

Israel-Gaza Conflict: A New Test for the Market

Short-term Impact and Quick Recovery

On October 7, 2023, the Israel-Gaza conflict erupted. On October 11, Bitcoin fell below $27,000, hitting a new low since September. Analysts largely attribute this to the negative impact of the Middle East conflict on investor sentiment. During the conflict, USDT transfer volume increased by 440% week-on-week, indicating that stablecoins are becoming the new infrastructure.

However, since the conflict began, there has been no significant fluctuation in the prices of digital assets. This relative stability reflects a decreased sensitivity of the Crypto Assets market to geopolitical events.

Iran-Israel Conflict: A Test of Bitcoin's Resilience

In April 2024, the conflict between Iran and Israel broke out, and on the day of the missile attack, Bitcoin's volatility was only ±3%, less than 1/3 of the volatility during the Russia-Ukraine war in 2022. The participation of institutional investors, with the trading volume of spot ETFs accounting for 55%, has somewhat alleviated the market impact caused by the war.

Even in significant events such as Israel's airstrike on Iran in June 2025, the Bitcoin market did not panic. Although Bitcoin dropped 4.5% to $104,343 within the first 24 hours of the war, and Ethereum fell 8.2% to $2,552, this drop was still manageable relative to the severity of the event, demonstrating strong resilience.

However, geopolitical risks are showing an upward trend, with the GPR index around 158. The previous time it exceeded 150 was in early 2024. The higher the geopolitical risks, the lower the investment, stock prices, and employment rate, which increases the probability of economic disasters and raises the downside risks for the global economy.

The Best Window to Observe Capital Logic

The moment the ceasefire agreement is signed often serves as the best window to observe capital logic. After the end of the Nagorno-Karabakh war in November 2020, Bitcoin nearly doubled in the following 30 days. The reason this territorial dispute in the Caucasus has ignited the Crypto Assets market lies in the fact that the war did not change the global easing tone; the Federal Reserve's ongoing bond-buying plan supported risk assets.

In contrast, during the Russia-Ukraine negotiations in March 2022, the brief hope for a ceasefire was shattered by expectations of interest rate hikes from the Federal Reserve, leading to a 12% drop in Bitcoin. On the day of the temporary ceasefire in the Israel-Palestine conflict in November 2023, the crypto derivatives market saw liquidations of $210 million. The BTC to EGP exchange rate on the Egyptian OTC market significantly decreased, reflecting a gradual retreat of demand in war-torn areas.

On January 15, 2025, Israel and Hamas agreed to a proposal for a ceasefire and prisoner exchange. Subsequently, Bitcoin surged sharply, breaking through $100,000 again before retreating. The market performance during the Middle East conflict has prompted people to reassess the safe-haven properties of Bitcoin.

Entering the Institutional Era

The war value of digital assets has not disappeared, but has been reconstructed in a contextual manner. The $127 million in crypto donations received by the Ukrainian government accounts for 6.5% of its early international aid; the underground network in Gaza maintains communication through Bitcoin mining machines; Iranian oil merchants utilize mixers to break through sanctions... These real applications in the margins are forming an underground ecosystem that runs parallel to the mainstream market.

The current crypto market has formed a clear war response mechanism, including attention to crude oil prices, the VIX panic index, and indicators such as open contracts. Data shows that less than 5% of the safe-haven funds released by geopolitical conflicts ultimately flow into the crypto domain, and this number may further shrink in the ETF era.

The real turning point lies in monetary policy. When the Federal Reserve opens the interest rate cut channel, the signing of a ceasefire agreement will become an accelerator for capital inflow. On June 18, 2025, U.S. interest rate futures prices reflected a 71% probability of a Federal Reserve rate cut in September, slightly up from 60% before the announcement. However, if the war causes a disruption in the energy supply chain, even if the conflict subsides, the shadow of stagflation will still suppress the Crypto Assets market. Therefore, paying attention to the Federal Reserve's interest rate policy remains crucial.

The Recovery Patterns of the Post-War Crypto Market

From the perspective of concluded conflicts, the end of war usually brings about a gradual recovery of market confidence. For the Bitcoin market, the advancement of peace processes typically 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 resistance during wartime, institutional investors may increase its weight in their portfolios. Conversely, if it performs poorly, it may face pressure from capital outflows. Based on recent performance, Bitcoin's relative stability during geopolitical crises may enhance its standing among institutional investors.

Conclusion

Looking to the future, with technological advancements and improved regulation, cryptocurrencies such as Bitcoin are expected to play a more important role in the global financial system. Although they may still face various challenges and fluctuations in the short term, their status as important financial tools in the digital age has already been preliminarily established.

In this era filled with uncertainty, digital assets such as 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 ignored.