Bitcoin Drops Below $63K as Middle East Tensions Trigger Risk-Off Selling
Bitcoin fell for a second straight day, dropping 1.4% to trade just under $63,600. It hit a session low of $62,732 early Friday, trimming its market cap and dragging the aggregate crypto market capitalization down 1.8% to $2.26 trillion.
The bearish tone extended to global equities, with the tech-heavy Nasdaq and global technology indices pulling back sharply. The sell-off was driven by a decline in artificial intelligence hardware stocks and ongoing military conflict in the Middle East. Unconfirmed reports of damage to Iranian civilian infrastructure on Friday fueled concerns that the conflict has entered a more volatile phase.
The geopolitical escalation pushed the U.S. crude benchmark, West Texas Intermediate (WTI), above $82 per barrel, while Brent crude surged past $87.
Some market observers remain unconvinced that geopolitical friction is the sole catalyst for the downturn. Analysts assert that macro sentiment remains weighed down by fears that a resilient economy will force the Federal Reserve to keep interest rates higher for longer — or potentially execute another quarter-point hike by year-end. Surging mortgage rates, which recently hit fresh annual highs, have compounded these monetary tightening fears.
Nicolai Sondergaard, a research analyst at Nansen, noted that bitcoin traded at $63,000 pre-consumer price index (CPI) data release, rallied to $65,100, and only retreated to $62,837 following news of escalation in the Middle East. Sondergaard pointed to wrapped bitcoin (WBTC) on-chain metrics to back up the thesis.
“The WBTC flow data shows the shock registered: net outflows hit -18.3 BTC in the strike hour, then reverted to a post-shock average of +0.67 BTC per hour, meaning buyers returned within the same session,” Sondergaard explained. “Smart money long/short ratios are running at 1.58 with zero stablecoin rotation in the 24-hour window, and seven-day inflows are concentrated in liquid staking, DeFi lending, and DEX protocols — risk-on sector allocation, not defensive positioning.”
Sondergaard added that a funding rate of 0.0011 alongside a z-score of 0.14 indicates that leveraged long positioning is not crowded enough to trigger a major liquidation cascade. Previous geopolitical escalations in the region have followed an identical pattern: a short-duration flush followed by steady accumulation.
“The inflation and liquidity channel is doing the structural work here,” Sondergaard concluded.