June 2025 was another reminder of how these factors can radically affect the market. Following the escalation of the conflict between Israel and Iran, the cryptocurrency market incurred total losses exceeding $160 billion within a week, and Bitcoin’s price dropped by 7.8%, according to BeInCrypto.
The macroeconomic situation was already unstable this month due to anticipation of US Federal Reserve rate hikes and new restrictions from regulators. Military conflicts further fueled this instability, resulting in such a vivid display of volatility.
Naturally, demand for stablecoins increased immediately. This was an understandable reaction from investors seeking to maintain financial stability amid heightened economic turbulence.
This article aims to explore the impact of geopolitics on the crypto economy, analyze current cases, and provide practical strategies for investors navigating global instability. After all, geopolitical events carry risks and create new opportunities for adaptive, informed investors.
What are geopolitical factors, and what role do they play?
Geopolitical factors are a combination of political, economic, and military events that influence global market behavior. In the context of cryptocurrencies, these factors become important indicators of instability, provoking changes in investment flows, cryptocurrency volatility, and shifts in interest toward individual assets.
The crypto market reacts sharply to geopolitical events because digital assets are perceived as high-risk instruments that are sensitive to global economic instability. During periods of tension, investors either turn to more stable assets, such as gold, the dollar, and stablecoins, or use crypto as a hedging tool in countries with limited access to global markets.
A situation similar to today’s has been observed before in history. In 2022, amid russia’s invasion of Ukraine and tightening Western sanctions, Bitcoin dropped to $36,300, causing a decline of over 15% in the total crypto market capitalization. These events demonstrate how acute geopolitical risks can cause a short-term crisis in the crypto market.
How does geopolitics affect cryptocurrencies in 2025?
In 2025, geopolitical factors shape an environment in which cryptocurrencies demonstrate both turbulent volatility and stability in certain segments.
Conflicts and sanctions
The Israeli-Iranian conflict caused a sharp outflow of liquidity and a decline in market capitalization of over $160 billion. Meanwhile, Western countries tightened sanctions against Iranian financial institutions, including a ban on cryptocurrency transactions. This was made possible through the technical implementation of restrictions via OFAC and EU blacklists, the blocking of addresses via Chainalysis and TRM Labs, the disabling of access to centralized exchanges via KYC and IP, and pressure on infrastructure providers.
Monetary Policy
In June, the US Federal Reserve raised interest rates to 5.75%, citing the fight against inflation as the reason. Consequently, demand for the dollar increased and investment in cryptocurrencies began to decline. The price of BTC dropped 6.2% in the week after the Fed’s announcement.
Regulatory changes
Amidst geopolitical turbulence, the focus on cryptocurrency regulation has intensified. On June 17, 2025, the U.S. Senate voted in favor of the GENIUS Act, a bill that proposes a clearer legal framework for stablecoins and tokenized securities. The market views the GENIUS Act as a moderately positive step because it legalizes certain forms of crypto transactions in the US rather than restricting them, unlike MiCA in the EU, where controls are stricter.
Interestingly, around this time, Donald Trump—whose name has been mentioned in connection with USDC and the USD1 stablecoin, launched by World Liberty Financial and founded by the former president’s sons—loudly declared his support for stablecoins. These statements were widely reported in the media and triggered a short-term rise in stablecoins and lively discussions about conflicts of interest.
Consequences for the Crypto Market
Price Volatility
With the onset of geopolitical escalation in June 2025, cryptocurrency volatility increased sharply. The price of Bitcoin (BTC) fell from $66,400 to $61,600 in less than a week, while Ethereum fell from $3,480 to $3,200 (according to Binance Square). Meanwhile, stablecoins grew in value — the volume of USDC transactions increased by 18%, and the total stablecoin market capitalization exceeded $140 billion, according to BeInCrypto.
Investor Behavior
Economic instability has caused contrasting reactions among investors:
- Retail traders began locking in losses, triggering short waves of sales and liquidations worth more than $1 billion on June 12.
- In contrast, institutional investors strengthened their Bitcoin positions as a hedge against inflation. According to OKX Institutional Insights, some funds increased their BTC reserves by 4–6%, using the correction as an opportunity to buy more.
Market Trends
Amid the uncertainty, new market trends began to emerge.
- There was an increased outflow of capital into traditionally reliable assets, such as gold, the dollar, government bonds, and stablecoins.
- Interest in decentralized protocols increased. DeFi turnover grew by 12% in the first half of June. This is due to a lack of trust in centralized crypto exchanges, especially after the restrictions in Iran and news of upcoming SEC audits.
Cases and Examples
Israeli-Iranian conflict: $1 billion in liquidations
One of the most striking examples of the impact of geopolitical factors on the market occurred from June 11 to 13, 2025. At the start of the 12-day war between Israel and Iran, capital fled Asian and Middle Eastern cryptocurrency exchanges, particularly those specializing in derivatives trading. According to OKX and Coinglass, the total volume of futures position liquidations on Binance, Bybit, and Bitget exceeded $1 billion in 48 hours. Traders with leveraged longs on Bitcoin and Ethereum were hit the hardest — the sharp drop in prices triggered cascading liquidations. Cryptocurrency exchanges with dominant retail traffic and high leverage levels were the most vulnerable.
The fall of Bitcoin in 2022
A historical example is February-March 2022, when russia’s invasion of Ukraine and subsequent Western sanctions caused the price of BTC to drop to $36,300. This decline was accompanied by a global outflow of capital from risky assets and the temporary suspension of operations by some European crypto platforms serving users in the CIS.
The strengthening of the dollar in June 2025
In June, the U.S. Federal Reserve raised its key rate once again, after which the dollar strengthened by 1.3% against a basket of currencies. This directly impacted the cryptocurrency market, causing the total market capitalization to fall 5.64% over the week, according to analysts at Binance Square and BeInCrypto.
Positive case: Trump’s support for stablecoins
Donald Trump publicly endorsed USDC and proposed the creation of the “American digital dollar” (USD1) to bolster U.S. competitiveness amid global digitalization. These statements, made at the Conservative Blockchain Summit in June, triggered a rise in stablecoins. The number of new USDC addresses with active transactions increased by 9.4% in the 48 hours following Trump’s speech.
Strategies for Investors in Times of Geopolitical Instability
Experts recommend the following practical strategies to reduce risk and preserve capital:
- Portfolio diversification: Distributing assets between BTC, ETH, stablecoins, and DeFi protocols helps minimize losses during local crashes. For instance, combining BTC, USDC, and Lido (stETH) mitigates the impact of individual events, such as sanctions or fiat currency depreciation.
- Hedging through stablecoins: In times of increased cryptocurrency volatility, stablecoins become a key hedging tool. USDT and USDC enable you to “wait out” instability without converting to fiat currency while maintaining access to the crypto infrastructure.
- News Monitoring: Regularly analyzing the news agenda helps you respond to changes in a timely manner, reducing the impact of sanctions, Federal Reserve statements, military conflicts, and regulatory initiatives on your capital.
- Long-term approach: Despite temporary setbacks, the crypto market retains its long-term potential. Investing in fundamental blockchain technologies (Bitcoin, Ethereum, and infrastructure tokens) is still a good idea, especially considering the impact of inflation on fiat currencies and the ongoing digital transformation.
Forecasts for the Future
Short-term expectations: moderate growth amid instability
Despite ongoing pressure from geopolitical factors, current market dynamics are positive overall. According to CoinMarketCap, Bitcoin’s price will exceed $107,000 by the end of June 2025. This reflects a steady inflow of capital into cryptocurrencies from institutional investors, as well as heightened interest in decentralized assets amid political and economic turbulence.
Analysts at Galaxy Digital and ARK Invest predict that, even if the geopolitical status quo remains unchanged, Bitcoin (BTC) could reach $150,000–$185,000 by 2025. The key growth drivers remain:
- growing interest in spot ETFs;
- institutional support through pension funds and trusts,
- and regulatory developments.
However, it is worth noting that these cryptocurrency forecasts represent an optimistic scenario that depends directly on external stability. If there is a new escalation in the Middle East or Europe or if US regulators take unpredictable actions, it is possible that there will be a correction and a return to a lower range ($90,000–$95,000 and below).
Long-term prospects: institutionalization as the main trend
According to Bitwise Asset Management’s forecast, investments in cryptocurrencies could grow by 30–50% by the end of the year due to the consistent legalization and integration of digital assets into the traditional economy and growing interest from sovereign wealth funds.
There will also be increased attention to blockchain infrastructure technologies, primarily second-layer networks, zero-knowledge proofs, and solutions for interbank settlements. These trends create a stable foundation for the market, even in the face of external shocks.
Conclusion
By 2025, geopolitical factors will have a more noticeable impact on the cryptocurrency market than ever before. Conflicts, sanctions, central bank decisions, and new laws increase cryptocurrency volatility, change investor behavior, and shape new market trends.
Geopolitical tensions and macroeconomic events can indeed cause temporary downturns. However, in the long term, the crypto market remains stable thanks to a solid foundation of blockchain technology development, institutional investments, stablecoin growth, and demand for financial independence from traditional systems.
Thank you for your attention. Invest safely and profitably!
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FAQ
How do geopolitical events affect the price of cryptocurrencies?
Geopolitical events increase the volatility of cryptocurrencies. During periods of heightened conflict, investors tend to move away from risky assets to more stable ones.
Why does Bitcoin fall during conflicts?
Military action and sanctions cause a massive outflow of capital from affected regions. This leads to sell-offs, a decline in demand, and consequently, a drop in the price of BTC. For instance, in June 2025, the Bitcoin exchange rate fell by almost 6% in a couple of days due to the escalation of the conflict in the Middle East. A similar situation occurred in spring 2022, following russia’s full-scale invasion of Ukraine. At that time, the price of BTC dropped by over 10% in just a few days.
Can stablecoins protect against volatility?
Yes. During periods of high volatility, stablecoins are a tool for preserving capital. They allow you to avoid drawdowns without leaving the crypto ecosystem and to quickly return to the market when conditions improve.
How does regulation affect the crypto market?
Tough measures can cause short-term uncertainty, but in the long run, regulation helps build trust. Laws such as the GENIUS Act in the U.S. and MiCA in the E.U. encourage institutional money to flow in and lay the groundwork for sustainable growth.
In the face of geopolitical risks, what should investors do?
Diversify your portfolio, monitor key macroeconomic events, and avoid panicking.
