The smoke over the Strait of Hormuz and the policy fog in Washington intertwine to form a complex macro landscape. The US-Iran standoff has entered its second week, with Iran's nuclear facilities approaching the "technical threshold," the dollar index surging past 108, and Federal Reserve rate cut expectations wavering—while virtual currencies, a new asset class once labeled "digital gold" and "safe haven assets" over the past few years, are undergoing an unprecedented test amid this storm of multiple variables.

Bitcoin experienced a second bottom during weekend volatility, briefly falling below $63,000, yet showed resilience amid quiet inflows of institutional funds; Ethereum fluctuated with the trend, with mainstream altcoins falling more sharply; meanwhile, tokens linked to energy and gold defied the trend and strengthened. Market participants have found that every pulse of war and macroeconomic change leaves clear footprints on the crypto price charts.

Ripple Effects from the Strait of Hormuz

On March 2, a Revolutionary Guard advisor in Iran dropped a "bomb": the Strait of Hormuz has been closed. Five days later, satellite images show that ships stranded around the strait have increased to about 150, including 120 oil tankers and 30 container ships. Major global shipping companies have suspended new bookings passing through the strait and are levying war risk premiums. This vital energy artery handles about 20% of global oil transportation, and its "de facto blockade" is triggering supply chain ripple effects: shipping costs from Asia to Europe rose 15% in a week, European natural gas prices jumped 8%, and rising aviation fuel costs are beginning to pass through to ticket prices. For capital markets, this means a re-pricing of "inflation expectations"—Brent crude oil stabilizing above $85, with $90 or even $100 not out of reach if the conflict persists.

More impactful news comes from the International Atomic Energy Agency: Iran has begun injecting uranium gas into thousands of new IR-6 centrifuges, enriching uranium to nearly 60%, just a step away from weapons-grade. The agency's director warned, "The window for diplomatic resolution is closing." Market reactions to this news are intriguing: gold briefly surged to $2,150 before retreating, while Bitcoin was under pressure and declined. This perhaps indicates that as the "nuclear threshold" nears, markets react not primarily with safe-haven buying but with fear of a full-scale Middle East conflict—such fear has a far greater damaging effect on risk assets than it does on safe havens.

Militarily, the Pentagon confirmed that the USS "Truman" carrier strike group has entered the Gulf of Oman, equipped with F-35C stealth fighters; simultaneously, Patriot missile batteries have been deployed to Saudi Arabia to counter Houthi missile threats. On the fiscal front, the White House is drafting an emergency supplemental budget of $50-80 billion for Middle East military operations and domestic energy reserves. If passed, this will further expand the US fiscal deficit and sow seeds for future inflation.

Three Macro Forces at Play

The dollar index broke through 108, reaching a new high since November last year. This trend results from the resonance of geopolitical tensions and monetary policy: war fears drive safe-haven capital into the US, while weak Eurozone economic data and the Bank of Japan's stance of patience weaken other major currencies. For cryptocurrencies, the impact of a strong dollar is complex and contradictory. In the short term, a stronger dollar means tighter global dollar liquidity, putting pressure on risk assets—Bitcoin's negative correlation with the dollar index hit -0.45 in February. But in the long term, the dollar's strength may be unsustainable: high fiscal deficits, persistent trade imbalances, and the long-term trend of de-dollarization will eventually weaken US dollar dominance. Some analysts point out that the deeper US involvement in Iran, the greater the likelihood of the Fed turning on the printing presses. When the Fed is forced to "pay for the war," the real bull market for Bitcoin may arrive.

Soaring oil prices are reshaping inflation expectations. The US 5-year breakeven inflation rate has risen to 2.65%, up 20 basis points from pre-conflict levels. But this round of inflation expectations differs fundamentally from the 2022 surge: current price increases are mainly concentrated in energy and commodities, with core goods and services experiencing relatively moderate price pressures; additionally, supply shocks and demand-driven inflation are fundamentally different—supply shocks are harder to address with monetary policy but more likely to trigger stagflation, where economic growth slows while inflation persists. This macro environment challenges traditional asset valuation models but may create unique opportunities for virtual currencies.

Market expectations for the Fed to cut rates within the year are subtly shifting. Federal funds futures show traders now price in a 58% chance of a rate cut in June, down from 75% before the conflict, and the total number of rate cuts expected for the year has been lowered from three to two. This change exerts dual pressure on cryptocurrencies: high interest rates suppress risk asset valuations, while delayed rate cuts mean the anticipated liquidity easing is postponed. But macro logic is never linear—if the war significantly increases recession risks, the Fed may be forced to cut rates earlier. This "stagflation + easing" combination is theoretically most favorable for gold and Bitcoin, as "non-sovereign currencies." This core contradiction in the market—recurring tug-of-war between expectations—causes asset prices to fluctuate wildly.

Crypto Market Performance in the Conflict

Reviewing asset performance since the outbreak of this conflict, the evolution of crypto's role becomes clear. Bitcoin fell from $68,000 to $65,800, a 3.2% decline, with a low of $63,000 and a high of $70,500, an 11.9% range. This volatility far exceeds the roughly 3.5% amplitude of the S&P 500 during the same period, but has become more normalized compared to past crises—during the March 2020 pandemic shock, Bitcoin's weekly volatility once exceeded 50%. Ethereum dropped from $3,400 to $3,200, a 5.9% decline, underperforming Bitcoin and continuing the trend since 2025: during uncertain times, capital tends to concentrate in leading assets. Mainstream altcoins generally declined 10-20%, showing higher beta, while some energy- and commodity-linked tokens held up or even rose.

This round of conflict has reignited discussions about Bitcoin's "digital gold" positioning. Spot gold rose 3.2% during the same period, briefly touching $2,150, demonstrating classic safe-haven attributes. Bitcoin's decline seems to confirm its more risk asset-like nature. But this simple comparison may obscure a more complex truth: gold market participants are mainly institutions, central banks, and long-term allocators, with relatively stable price discovery; whereas Bitcoin markets trade 24/7, with a high proportion of retail traders and active leverage, reacting excessively to short-term shocks. Comparing Bitcoin's immediate response to gold's smooth trend is unfair. During panic, Bitcoin often becomes a "liquidity faucet"—investors sell liquid assets to raise cash rather than buy new safe havens. This explains the micro-mechanism behind Bitcoin's weekend plunge on March 2: traditional markets closed, and cryptocurrencies became the only tradable liquidity assets, absorbing all selling pressure. Once traditional markets reopen, genuine safe-haven demand begins to emerge, and Bitcoin may stabilize. Moreover, gold holders are mainly central banks and long-term investors, with relatively stable behavior; Bitcoin holders include more short-term traders and leveraged speculators, leading to overreactions to news. But with the rise of spot ETFs, institutional holdings are increasing—since the launch of the US spot Bitcoin ETF, net inflows have exceeded $20 billion, which could alter Bitcoin's volatility profile in the future.

On-chain data offers another dimension to gauge market sentiment. Addresses holding over 1,000 BTC increased by 2.3% during the conflict, reaching a three-month high, indicating large holders are accumulating on dips, contrasting with retail panic selling. On March 2-3, exchange net inflows totaled about 45,000 BTC, showing some investors are exiting, but in the following days, net outflows resumed, returning to pre-conflict levels. On-chain analysis shows short-term holders (less than 155 days) are the main sellers, with spent output profit ratios dropping to 0.98, indicating these holders are selling at a loss; long-term holders (over 155 days) remain relatively stable, showing stronger confidence. These data sketch a divided market: retail investors retreat in panic, while institutions and large holders buy the dips; short-term traders chase trends, long-term investors anchor on value. This split indicates Bitcoin is transitioning from a "retail speculative asset" to an "institutional allocation asset," accelerated by the war.

Correlation with Traditional Assets

Bitcoin maintained a positive correlation with US stocks during the conflict, but its volatility was about 3-4 times that of equities. This "high beta" characteristic means Bitcoin tends to outperform when risk appetite is high but suffers larger declines during risk aversion. Notably, US stocks showed resilience—after a sharp decline on March 2, they rebounded across the board, supported by US energy independence and the dollar's safe-haven role. Bitcoin's movements, to some extent, serve as a "leading indicator" of global risk sentiment.

Bitcoin and gold show a weak negative correlation in the short term, but this relationship is unstable. On March 2, when Bitcoin plunged and gold rose, the correlation hit -0.6; but in subsequent days, it turned positive. This instability reflects ongoing market debate about Bitcoin's role—some see it as "high-volatility gold," others as a risk asset.

Bitcoin and crude oil exhibit a slight positive correlation. Theoretically, rising oil prices boost inflation expectations, favoring Bitcoin; but higher oil prices also increase stagflation risks, dampening risk appetite. These opposing forces offset each other, resulting in no significant correlation. Notably, some energy-linked tokens performed actively during this conflict, indicating market demand for direct energy price hedging.

Future Outlook: Interwoven Evolution of Three Main Themes

Looking ahead, the trajectory of cryptocurrencies will be shaped by three main threads.

Geopolitical developments are the most critical short-term variable. Key points to monitor include: the actual implementation of the blockade, diplomatic negotiations over Iran's nuclear program, and domestic US political pressures. If the conflict persists but does not escalate fully, markets may gradually "adapt" to geopolitical risks, and volatility could normalize. If tensions unexpectedly ease, a decline in oil prices could boost risk assets, and Bitcoin may rebound. If the conflict escalates sharply, all risk assets will face pressure in the short term, but Bitcoin might benefit in the medium to long term from "fiat devaluation" logic.

Monetary policy shifts will be the next key node. The March 17 Fed meeting will focus on dot plots, inflation forecasts, and Powell's statements. If the Fed maintains a dovish stance, emphasizing economic support, Bitcoin could benefit from easing expectations. If it turns hawkish, stressing inflation risks, Bitcoin will face short-term pressure. The most complex scenario is a "stagflationary stance"—acknowledging recession risks while emphasizing inflation—this ambiguous signal could trigger market volatility.

The endogenous cycle of cryptocurrencies also warrants attention. The digestion of halving effects, inflows of institutional funds, and technological breakthroughs will influence relative performance. Historical data shows that 12-18 months after halving, a major bull run often occurs, and we are approaching the end of this window. The launch of US spot Bitcoin ETFs has opened a compliant channel for institutional funds; if macro conditions improve, ETF inflows could catalyze the next rally. Additionally, Ethereum upgrades, Layer 2 solutions maturing, and new blockchains emerging could reshape the internal structure of virtual currencies. Macro environment sets the overall level, but technology and application determine relative performance.

The fires in the Strait of Hormuz reveal multiple facets of virtual currencies—they are both risk amplifiers and value anchors; they fluctuate with macro trends yet seek to transcend macro. This conflict is accelerating the "coming of age" of cryptocurrencies, forcing them to test their resilience in the flames. For investors, perhaps the most important thing is not predicting the war's course or guessing Fed decisions, but understanding the deep shifts in asset pricing logic. When Bitcoin diverges from gold, what is it telling us? When institutions buy dips and retail panic sells, how is the market structure changing? When the dollar is strong and inflation expectations coexist, does the traditional macro framework need rethinking?

There are no standard answers to these questions, but each inquiry deepens our market understanding. In this era of information overload and heightened volatility, staying alert, learning continuously, and respecting uncertainty may be the best strategies to navigate the fog. After all, history repeatedly proves that true opportunities often emerge where consensus breaks down; real value often reveals itself amid chaos. And this storm is laying the groundwork for the next cycle.