Bitcoin Rebounds After Iran Strikes Trigger Flash Selloff and $490M in Crypto Liquidations

Bitcoin’s knee-jerk drop overnight underscored how quickly leverage reacts to geopolitical shock. As the United States and Israel launched what officials described as joint “major combat operations” in Iran—targeting military sites tied to nuclear and ballistic missile programs and aiming to eliminate key leaders—BTC slid from $65,572 to $63,176 in roughly an hour before clawing back most of the move. By mid-morning, Bitcoin traded around $65,051 (CoinGecko), leaving it about 0.8% lower on the day and 5.2% down over seven days. Ethereum, XRP, and Solana each slumped on the headlines and then retraced much of the dip, with daily declines under 2%.

The liquidity story tells you more than the price chart. CoinGlass tracked about $490 million in crypto liquidations across 24 hours, led by long positions in Bitcoin and Ethereum. Approximate breakdown: $196 million tied to BTC, $132 million to ETH. That purge resembles a typical “liquidation sweep” where thin order books during off-peak hours meet concentrated perp leverage and headline risk—one sharp move begets forced exits, which momentarily exaggerate the downside before price normalizes.

Context matters for positioning. At last night’s trough, Bitcoin sat roughly 50% below its all-time high above $126,000 set last October. The asset has retreated about 23% in the past month and started the year near $87,000. In that backdrop, many traders were already running tighter risk and lighter liquidity; conflict news simply catalyzed a quicker path to the levels where stops and margin calls cluster.

The key dynamic worth focusing on: Bitcoin’s “flight-to-safety” narrative often collides with the reality of crypto market microstructure during kinetic events. In the first minutes of uncertainty, participants tend to de-gross exposure, sell what’s liquid, and raise dollars. Perp markets can amplify that impulse because funding flips quickly, and basis compresses as longs are forced out. Once the forced flow exhausts and information clarity marginally improves, spot buyers and market-makers step back in, rebuilding depth and stabilizing price. We saw that sequence overnight—fast outsized downside, followed by a measured rebound—mirroring prior episodes such as the 2022 Russia-Ukraine invasion when risk assets, including Bitcoin, initially sold off on the headline.

There’s an uncomfortable human dimension that markets price in imperfectly. Reports out of Iran point to mass civilian casualties, including a reported 85 deaths after a girls’ school was struck in Minah province. Iran launched retaliatory attacks against U.S. military assets across the Middle East as the country grappled with the strikes’ aftermath. Such developments inject path dependency into markets: escalation risk, policy uncertainty, and sanctions pathways can all affect liquidity, correlations, and volatility regimes.

Prediction markets are already reflecting regime-risk speculation. On Myriad, users now assign a 51% chance that Iran’s government collapses before October, up 20 percentage points over the last day. Even if those odds prove optimistic or fleeting, they shape hedging behavior and volatility pricing in the near term.

What matters next for crypto market structure: - Funding and basis: sustained negative funding or a compressed basis would imply lingering de-leveraging rather than a one-off flush. - Depth and spreads: thinner books during Asia/Europe hours keep whipsaw risk elevated. - Options skew: persistent demand for downside protection would signal that traders are treating rallies as opportunities to reload hedges rather than re-risk.

Bitcoin’s role in portfolios tends to be path-dependent: it can act like a macro hedge over long horizons yet trade like a high-beta risk asset around sudden geopolitical shocks. Overnight price action—sharp deleveraging, swift partial recovery, contained daily losses across majors—fits that pattern.