Escalating geopolitical tensions following statements from U.S. President Donald Trump have triggered a sharp sell-off in Bitcoin and broader crypto markets. On April 2, Trump claimed responsibility for an attack on Iran's Ghadir Bridge, the nation's largest, and warned of further strikes on infrastructure, including power plants, if negotiations fail. He stated the situation would worsen over the next two to three weeks, contradicting market expectations of a de-escalation.
The announcement caused Bitcoin to drop from an intraday high of $67,376 to $66,345 within hours. This decline extended a bearish trend, with Bitcoin narrowly avoiding a sixth consecutive monthly loss in March, posting only a 1.8% gain, and suffering a 22.2% decline in Q1 2026—its worst first-quarter performance since 2018.
Analysts from XWIN Research Japan issued a stark warning, linking the sell-off to deeper structural vulnerabilities in Bitcoin's derivatives market. They highlighted that CME Bitcoin futures open interest has reached 18,000 to 20,000 BTC, heavily concentrated in short-dated contracts. This concentration means price discovery is being driven more by leveraged positioning than underlying spot demand. Under market stress, these positions could liquidate rather than roll over, creating cascading sell pressure that amplifies price declines.
The firm outlined three bearish scenarios based on escalating conditions. In the mildest case, with current conditions persisting, Bitcoin could fall 25-30% to around $50,000. If Bitcoin ETFs see sustained outflows, the price could drop 60-70% to between $20,000 and $30,000. The worst-case scenario, involving a full blockade of the Strait of Hormuz or a regional war, could see Bitcoin plummet by approximately 80% to around $10,000.
The broader financial context also turned negative for risk assets. Following Trump's statements, oil prices surged 11.41% to $111 a barrel, raising inflation fears, while the U.S. dollar strengthened, tightening global liquidity. Traditional market stress indicators, like the VIX fear gauge rising to around 25 and widening bond market stress, pointed to deteriorating liquidity conditions historically negative for both equities and crypto.
