Bitcoin Climbs Back Above $61K Amid Worst Start to October as Israel-Iran Conflict Intensifies

Global markets, including equities and risk assets like Bitcoin, faced a sharp decline on Tuesday after Iran launched missiles targeting key Israeli locations. Israel, in response, threatened retaliatory strikes in the coming days, escalating tensions in the Middle East. As a result, Bitcoin (BTC) suffered a drop during the first half of Asia's trading hours on Wednesday.

Despite the turmoil, Bitcoin rebounded above $61,500 during Wednesday's Asian morning hours, after hitting a low of $60,300 late Tuesday. The ongoing conflict has weighed on expectations for a rally during October, historically considered Bitcoin's most bullish month.

The missile strike, involving about 200 ballistic missiles fired by Iran on Tuesday, came in retaliation for recent Israeli attacks on Lebanon. Israeli Prime Minister Benjamin Netanyahu has vowed to respond to the aggression. This geopolitical instability contributed to Bitcoin's worst performance in over a month, while safe-haven assets like gold surged. Bitcoin’s price fell by 6% at one point, and registered a 3.5% loss over the past 24 hours, marking the weakest start to October, according to Presto Research.

Polymarket bettors now give a 49% chance that Israel will retaliate against Iran before the end of the week.

"October has historically been a strong month for BTC, with only two losing years in the last 11," noted Presto. They highlighted gold's stronger performance over the past day as evidence of the contrasting maturity levels of these assets.

"Tuesday’s BTC price drop (-4%) compared to gold's rise (+0.8%) after Iran’s attack may seem surprising, especially given BlackRock's recent positioning of Bitcoin as a risk-off asset similar to gold," wrote a team of researchers led by Peter Chung. "The difference in short-term price action between the two reflects their varying maturity phases."

The broader CoinDesk 20 (CD20), which tracks the most liquid digital assets, also dropped by 4.7%, recording its worst decline in weeks.

"Gold, with a 5,000-year history as a store of value, has less room for incremental gains from network effects. Bitcoin, though, shares many of gold’s qualities as a store of value (and in some cases, it's even better), but with only a 15-year track record, it's still in the early stages of mainstream adoption. Its narrative as a store of value is still evolving," the researchers explained.

Among major tokens, Dogecoin (DOGE) led losses, plunging by 8% over the last 24 hours, according to CoinGecko. XRP (XRP), Solana’s SOL, BNB Chain’s BNB, and Ethereum (ETH) also saw declines of up to 6%. Smaller tokens, particularly those with market caps under $2 billion, suffered even greater losses. Sei Network’s SEI, memecoin FLOKI, and Starknet’s STARK dropped as much as 16%.

As tensions in the Middle East persist, market volatility is likely to continue, leaving investors wary of further impacts on the cryptocurrency market.