Bitcoin slides as global tensions unsettle markets

Bitcoin retreated ahead of the US market open, mirroring declines in equity futures as traders returned from a three-day break to a more fragile macro backdrop marked by geopolitical strain and shifting rate expectations.

The world’s largest cryptocurrency fell below key technical levels in early trading, extending a pullback that began over the weekend. The move coincided with weakness in US stock-index futures and a firmer dollar, underscoring how digital assets remain closely tied to broader risk sentiment despite their reputation as an alternative store of value.

Market participants pointed to renewed geopolitical tensions in the Middle East and Eastern Europe, alongside persistent uncertainty over the trajectory of US interest rates, as catalysts for a defensive tilt across asset classes. Brent crude rose on supply concerns, while US Treasury yields edged higher, reflecting caution over inflation and central bank policy.

Bitcoin has traded in a wide range this year, supported at times by robust inflows into US spot exchange-traded funds and corporate treasury allocations, but vulnerable to abrupt shifts in macro sentiment. After climbing to record highs above $70,000 earlier in the year on the back of ETF demand and anticipation of looser monetary policy, the token has struggled to maintain upward momentum as expectations for rapid rate cuts have been pared back.

Analysts say the latest slide highlights the cryptocurrency’s growing integration with traditional finance. Correlation metrics compiled by several research firms show Bitcoin’s relationship with the Nasdaq 100 index strengthening during periods of stress, particularly when investors unwind leveraged positions across markets. “When equities wobble and volatility rises, crypto is often among the first assets to be sold,” said one London-based digital asset strategist, noting that systematic funds frequently reduce exposure to high-beta instruments in tandem.

The cautious tone comes as traders reassess the outlook for Federal Reserve policy. Stronger-than-expected US economic data and sticky inflation readings have led markets to scale back bets on the number and pace of rate reductions this year. Higher-for-longer borrowing costs typically weigh on non-yielding assets, including gold and cryptocurrencies, by increasing the opportunity cost of holding them.

At the same time, geopolitical developments have injected a fresh layer of uncertainty. Escalating hostilities in parts of the Middle East and ongoing conflict in Ukraine have pushed energy prices higher and prompted safe-haven flows into the dollar. While some proponents argue that Bitcoin can serve as a hedge against geopolitical risk, its performance during episodes of acute tension has often resembled that of speculative technology shares rather than defensive assets.

Other digital tokens followed Bitcoin lower, with Ether, the second-largest cryptocurrency, also declining. Shares of listed crypto-related companies, including major US exchanges and mining firms, slipped in pre-market trading, reflecting the broader risk-off mood. The total market capitalisation of digital assets fell accordingly, though it remains well above levels seen during the 2022 downturn.

Institutional flows remain a key variable. Data published by ETF issuers show that inflows into spot Bitcoin funds have moderated compared with the surge seen after their approval by the US Securities and Exchange Commission in January. While cumulative net subscriptions remain substantial, daily flows have turned more volatile, suggesting that some investors are taking profits after strong gains earlier in the year.

Derivatives markets indicate a build-up of short-term hedging activity. Funding rates on perpetual futures have eased, and options data point to rising demand for downside protection, with put-call ratios edging higher. Liquidations of leveraged long positions on major exchanges added to downward pressure during thin trading hours, according to analytics platforms that track on-chain and derivatives activity.

Despite the pullback, long-term proponents argue that the structural case for Bitcoin remains intact. The network’s most recent “halving” event, which reduces the rate of new coin issuance roughly every four years, took place in April, tightening supply growth. Historically, halvings have been followed by extended bull cycles, although past performance offers no guarantee of future returns.

Corporate and sovereign adoption narratives also persist. Several publicly traded companies continue to hold Bitcoin on their balance sheets, and policymakers in a handful of jurisdictions are exploring clearer regulatory frameworks aimed at attracting digital asset businesses. In the United States, debate continues in Congress over comprehensive crypto legislation, while regulators maintain scrutiny over compliance and market integrity.