Bitcoin dropped more than 2% on Tuesday as the U.S. and Iran traded fresh strikes, sending traders into risk-off mode. The coin fell to $77,363, down from a Friday peak near $81,282, as rising oil prices raised fears the Federal Reserve will hold off on rate cuts.
Bitcoin drops as US and Iran trade strikes
Bitcoin slid on Tuesday after investors went into risk-off mode following escalating attacks between the U.S. and Iran. The largest cryptocurrency had initially shrugged off President Donald Trump's threats to the Middle Eastern nation, as well as the first strikes.
But the standoff intensified on Tuesday, and bitcoin's price slid more than 2% on the day, trading for $77,363. The coin had pushed as high as nearly $81,282 on Friday.
What triggered the latest escalation
The U.S. struck Tuesday after Iran tried to place mines in the Strait of Hormuz and after an attack on an American military base in Jordan, according to President Trump. U.S. Central Command said on X that Iran had also attacked commercial ships, tying the strikes to recent Iranian actions against shipping and American personnel in the region. According to Iranian media: "decisive operation" — the term used to describe Iran's response against U.S. military bases, and oil surged on the news.
Bitcoin's price has been sensitive to geopolitical tension this year, particularly since Iran and Israel exchanged attacks earlier in the year. The cryptocurrency has typically faced downward pressure on news of war, only to then rally when Trump raised hopes of a ceasefire. Bitcoin's price has stayed relatively muted in recent months, but it has swung more wildly since mid-August.
Oil, inflation and the Fed
Bitcoin's immediate reaction to rising oil prices is to drop. More expensive energy means higher inflation, and higher inflation typically means the Fed will postpone rate cuts, which can restrict the liquidity bitcoin needs to gain momentum. Fed chair Kevin Warsh, in his first major speech as central bank leader last week, said inflation in the U.S. had not come down enough.
Traders are now no longer pricing in an interest rate cut this year and instead expect a hike. Bitcoin has typically performed well in low interest rate environments.
Still, the coin had one of its best runs in August after the U.S. Treasury said it would at least double the size of its liquidity-support buyback operations in response to surging borrowing costs. That announcement hurt the dollar, while non-yielding assets like bitcoin and gold benefited.
Source: Bitcoin Magazine
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