Bitcoin plummeted as the market reacted to the ongoing conflict between Israel and Iran. On a macroeconomic level, crypto-asset markets have been shaken by the escalation of geopolitical tensions between Iran and Israel, challenging the notion of ‘Uptober’ and raising doubts about the role of digital assets like cryptocurrencies during global crises.

As the conflict unfolds, its collateral effects are being felt across all financial markets, with some cryptocurrencies and ETFs experiencing considerable volatility.

The immediate response to Iran’s missile strike against Israel sent Bitcoin down to around $60,200, indicating a considerable 6% decline from recent highs of approximately $64,000. This drop was not limited to Bitcoin, as Ethereum and other altcoins also posted losses, with Ethereum falling by more than 4% and Solana down 5%.

The market turmoil triggered massive liquidations, with Coinglass reporting that $523.37 million was lost within just 24 hours. Long positions suffered the most, with $451 million liquidated compared to $71 million in short positions. This volatility resulted in the liquidation of 154,011 traders, demonstrating the significant impact of the ongoing crisis on the cryptocurrency market.

The rapid market decline has drastically altered investor sentiment. The cryptocurrency fear and greed index, a key measure for analyzing market sentiment, dropped from a “greed” level of 61 to a “fear” level within 42 days.

Additionally, U.S. spot Bitcoin ETFs recorded significant outflows, with withdrawals totaling $242.53 million on October 1 alone. This marked the largest outflow in nearly a month and the third largest in five months, signaling a broader pullback from crypto-assets amid heightened global uncertainty.

The current crisis calls into question the idea that cryptocurrencies, especially Bitcoin, serve as a safe haven during global turmoil. Although some advocates have long argued that Bitcoin’s decentralized nature makes it an ideal hedge against geopolitical risks and tensions, its recent behavior suggests otherwise.

However, not all analysts view this decline as a long-term setback. For instance, André Dragosch, European head of research at Bitwise, points out that Bitcoin has historically demonstrated resilience in recovering from geopolitical turbulence.