Bitcoin Drops 5% Amid Middle East Tensions, Historically Rebound Likely

Bitcoin (BTC USD) experienced a significant price decline earlier this week, coinciding with Israeli airstrikes in Iran that disrupted global markets. The BTC/USD rate on Binance dropped to approximately $102,650 during this period. This decline was accompanied by a roughly 5% increase in oil prices, reflecting heightened tensions in the Middle East. As a result, cryptocurrencies and other risk assets saw sell-offs, while safe-haven commodities like oil experienced surging demand.

Despite the recent downturn, historical data suggests that Bitcoin has a tendency to rebound after such events. According to Bitwise Europe research chief André Dragosch, after the top 20 geopolitical risk events since 2010, Bitcoin has averaged a 64.6% climb in the following 50 days, with a median gain of 17.3%. This pattern indicates that past crises were often followed by strong rallies, suggesting that the recent drop could be temporary.

Blockstream CEO Adam Back supports this view, noting that Bitcoin's returns after major events since 2020 often outperformed gold and the S&P 500. For instance, following the U.S.–Iran escalation in January 2020, Bitcoin gained roughly 20% in 60 days, compared to single-digit moves in stocks or gold. An academic study from October 2020 also found a bidirectional causality between Bitcoin prices and geopolitical risk indices, suggesting that BTC can act as a stabilizing asset during uncertainty.

On-chain metrics further support the idea that Bitcoin may be undervalued. CryptoQuant’s data shows that the Puell Multiple, which compares daily miner revenue to its annual average, remains unusually low at around 1.3. This indicates that miner revenues have not yet caught up to price, implying that the rally is driven more by demand than by frantic selling. Historically, readings below 1.0 are seen in market bottoms or accumulation phases. The April 2024 halving, which cut the block reward per mined block in half, has also contributed to this dynamic by constraining new supply, thereby easing supply-side pressure and driving price gains largely through demand.

Another bullish sign is that most Bitcoin holders are currently in profit. According to Glassnode data, the average acquisition price for one-week holders is about $106.2K, one-month holders $105.2K, three-month $98.3K, and six-month $97.0K. Since current Bitcoin prices are in the $102K–108K range, this means that the typical holder has bought below today’s level. Very few addresses are sitting at a loss, which limits panic selling as most investors are still in profit and have no immediate reason to dump coins.

In summary, the confluence of data suggests that the recent dip may present a premium buy opportunity. Historical precedent shows that Bitcoin often bounces strongly after geopolitical shocks. The Puell Multiple and cost-basis metrics indicate that fundamentals remain solid—miners’ earnings are lagging, and supply is tight after the halving. These factors point to a robust foundation for a recovery. While uncertainties in the Middle East could still unsettle markets in the near term, the evidence suggests that this flash crash has traits of a classic dip-buy scenario rather than a trend reversal.