After a promising start to the week, bullish momentum across financial markets has evaporated. Bitcoin (BTC) has retreated nearly 5%, moving in near-lockstep with traditional benchmarks like the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite. Gold, typically a safe-haven asset, also declined. In stark contrast, crude oil prices have surged 7.30% and are now up 53% since the U.S. and Israel–Iran conflict intensified on February 28.
This coordinated weakness underscores a significant shift in capital flows as geopolitical risk rises. Data reveals notable outflows from major stock exchange-traded funds (ETFs), highlighting a broad-based move to reduce portfolio risk among traders and investors.
Record Capital Exodus Hits Traditional Markets
Analysis from the market research firm The Kobeissi Letter indicates that investors withdrew a combined $64 billion from the S&P 500 ETF (ticker: SPY) and the Nasdaq 100 ETF (ticker: QQQ) over the past three months. This marks the largest three-month outflow on record for these funds, completely reversing the $50 billion in inflows seen in November 2023. The withdrawals now represent approximately 5% of the total assets under management for these two popular ETFs.
Source: The Kobeissi Letter/X
The trend has spilled over into the newly launched spot Bitcoin ETFs. These funds experienced $253 million in net outflows over just the past two trading days, according to available data. While monthly flows for the Bitcoin ETF cohort remain positive at $1.48 billion, this figure follows cumulative outflows of $6.3 billion between November 2023 and February 2024, suggesting a fragile and hesitant recovery in institutional demand for crypto exposure.
On-Chain Data Shows Market Under Selling Pressure
On-chain analytics from Glassnode provide a micro-level view of the strain. The metric for net realized profit/loss—which tracks the value of coins moved relative to their purchase price—briefly accelerated to around $17 million per hour (24-hour average) in realized profits. This spike indicates a wave of selling as some holders capitalized on recent highs. However, this momentum quickly faded, coinciding with Bitcoin’s price slipping back below the critical $70,000 psychological level.
Glassnode analysts commented on the broader context, stating: “Broader geopolitical uncertainty appears to be compressing demand depth, limiting the market’s capacity to absorb even moderate realization events.” In simpler terms, the current pool of active buying demand is insufficient to comfortably handle typical levels of profit-taking, making the market more susceptible to price declines.
Source: Glassnode
Historical Parallels to the 2022 Ukraine War
Market participants are actively comparing the current geopolitical cycle to the Russia-Ukraine war, which began on February 24, 2022. Crypto commentator Carlitosway highlighted a striking temporal coincidence, noting both major events escalated in February four years apart.
The 2022 pattern is notable: Bitcoin sold off sharply in the immediate aftermath of the invasion but staged a 24% relief rally over the subsequent four weeks. That rebound, however, proved unsustainable. Selling pressure returned, leading to a further 64% collapse by November 2022 as a broader macroeconomic downturn took hold.
Source: Cointelegraph/TradingView
A similar sequence appears to be unfolding now. Bitcoin rallied nearly 10% in the week following the latest escalation in the Middle East, only for momentum to stall and reverse. Carlitosway attributes this recurring weakness to a confluence of factors persistent during geopolitical strife: strained global liquidity, rising energy costs, and forced selling from leveraged positions or institutions rebalancing during periods of stress. These conditions collectively dampen the follow-through buying necessary for a sustained rally.
Analyst Outlook: A Path to Stabilization
Crypto analyst Finish suggests the recovery process may require a deeper price correction first, positing a potential bottom near $55,000. The analyst frames the current environment as fundamentally “risk-off,” noting the S&P 500 has lost trillions in market capitalization.
“I frankly think that until the Iran war is settled, it’s gonna be hard for $BTC to rise. The environment is
