After a strong start to the week, Bitcoin (BTC) fell nearly 5%, along with the S&P 500, DOW, Nasdaq and gold. On the other hand, the price of crude oil has risen by 7.30% and by 53% since the start of the war between the United States, Israel and Iran on February 28.
The collective market weakness highlights a coordinated shift in capital flows as the war in the Middle East continues, with an uptick in outflows from S&P 500 and Nasdaq 100 ETFs further highlighting traders’ decision to cut risk.
Capital flight occurs in all investment markets
Al Qubaisi’s letter reported combined outflows of $64 billion from the S&P 500 (SPX) ETF and Nasdaq 100 ETF (QQQ) over the past three months, the largest ever.
This reverses the $50 billion inflow seen in November and pushes outflows to 5% of total assets under management.
Spot Bitcoin ETFs reflected the broader market’s weakness, recording $253 million in outflows over the past two days.
While monthly ETF inflows remain positive at $1.48 billion, this comes on the back of cumulative outflows of $6.3 billion between November and February, highlighting the fragile recovery in investor demand.
Glassnode data suggests that the market is struggling to absorb selling pressure. Net profit taking briefly accelerated to around $17 million per hour (24-hour average) before losing momentum, after which the price of Bitcoin fell below $70,000. Glassnode added,
“Broader geopolitical uncertainty appears to be weighing on the depth of demand, limiting the market’s ability to absorb moderate realization events.”
Related: Market Analyst Sees Further Decline in Bitcoin, Points to $60K as Key Level
War-influenced market cycles shape Bitcoin price movement
Market participants are framing Bitcoin’s move against past geopolitical events, drawing parallels between the current war between the US, Israel and Iran and the Russia-Ukraine war in 2022.
This coincidentally happened four years apart in February, with cryptocurrency commentator Karlitosway pointing out that after the Russian attack on Ukraine on February 24, 2022, Bitcoin initially sold off before recording a 24% bounce in the following four weeks. The momentum faded soon after, with Bitcoin falling another 64% by November 2022.
A similar sequence is unfolding this month, with Bitcoin rising nearly 10% at one point last week since the start of the war, but momentum is now slowing.
Carlitosway linked the weakness to ongoing pressure on liquidity, rising energy costs, and continued forced selling during periods of stress, all of which reduce subsequent demand for Bitcoin.
The pattern suggests a longer stabilization phase, where recovery may take some time as capital is rebuilt and selling pressures disappear.
Cryptocurrency analyst Fenech believes that the recovery path for Bitcoin may occur after the price reaches a bottom of around $55,000. The analyst added
“I honestly think that until the Iran war is settled, it will be difficult for Bitcoin to rally. The environment is risk off, and the SPX has lost trillions in capital value, which leads me to a more neutral stance.”
Related: What Happens to Bitcoin If Oil Hits $180 a Barrel?
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