Market "Cash is King"! Iran War and Inflation Squeeze, Bitcoin Price Under Pressure

Monday, Bitcoin (BTC) hovered around $70,791 under pressure. Amid multiple headwinds—including the U.S. 5-year Treasury yield rising to a 9-month high and ongoing tensions from the Iran war fueling inflation concerns—market risk sentiment broadly declined. Analysts indicate that as long as inflation and war-related expenditures continue to dominate monetary policy expectations, the probability of Bitcoin retesting the $66,000 level remains quite high.

Market Shifts to Cash: Dual Drivers of Iran War and Inflation

The ongoing Iran conflict has pushed oil prices above $90 per barrel, exerting significant inflationary pressure. The Wall Street Journal reports that the U.S. plans to deploy approximately 3,000 troops to the Middle East to counter Iran’s influence over the Strait of Hormuz; Congress is also debating an additional $200 billion in military spending, with reports indicating that $12 billion has already been disbursed.

In terms of capital flows, the simultaneous decline of U.S. Treasuries and gold is the most notable signal. Traditionally, during heightened risk aversion, funds flow into Treasuries or gold. However, now both are being sold off, indicating that traders are actively increasing their cash holdings—either to offset recent losses or to prepare for further declines in risk assets. Bitcoin has not benefited from this risk-off sentiment; instead, it has come under pressure along with overall risk assets.

Macro Stress Indicators: Four Alarms Blaring Simultaneously

(Source: TradingView)

U.S. 5-Year Treasury Yield: Rose to 4.10% on Monday, a 9-month high, reflecting a market re-pricing of ongoing inflation expectations.

FOMC July Rate Hike Probability: According to CME FedWatch, the implied probability of a rate hike before July jumped from 0% a week ago to 20.5%.

U.S. Treasury Market Size: Surpassed $39 trillion, further raising concerns over consumer living costs and fiscal sustainability.

S&P 500 Index: Fell to over 6-month lows, with broad declines in technology stocks including Google (GOOG US), Meta (META US), and IBM (IBM US), which have collectively dropped over 10% in the past six weeks.

Tech Stocks Decline and AI Bubble Concerns Amplify Overall Selling Pressure

The widespread decline in tech stocks further reinforces a defensive market stance. Reuters reports that OpenAI, the developer of ChatGPT, has promised private equity firms a guaranteed minimum return of 17.5%, despite the company still being unprofitable, sparking widespread concerns over excessive speculation in the AI sector. Although Bitcoin’s on-chain fundamentals remain relatively solid, the deteriorating macro environment makes it difficult to find catalysts for sustained upward movement. Analysts believe that before inflation and war-related spending lead to prolonged tightening of U.S. monetary policy, Bitcoin faces at least a test of the $66,000 level. Additionally, the growing caution among traders regarding fixed income yields exceeding 4% is spreading.

Frequently Asked Questions

Q: Why does Bitcoin continue to remain under pressure in a war and inflation environment?
A: Capital flows show investors are favoring cash over risk assets—including traditional safe havens like gold, which is also being sold off. Rising U.S. Treasury yields increase the opportunity cost of holding non-yielding assets like Bitcoin, making it difficult for it to gain upward momentum in the short term.

Q: What does the increase in the FOMC rate hike probability to 20.5% mean for Bitcoin?
A: The jump from 0% to 20.5% in the likelihood of a rate hike indicates that the market is re-pricing inflation expectations. A high interest rate environment generally enhances the attractiveness of cash and fixed income instruments, reducing the relative appeal of risk assets like Bitcoin and potentially suppressing speculative buying.

Q: Where is Bitcoin’s key support level right now?
A: Analysts point out that Bitcoin faces the risk of testing the $66,000 level again. If this support fails, given the ongoing war expenses and inflation pressures unlikely to subside in the short term, the technical outlook remains cautious. Currently, Bitcoin’s on-chain fundamentals are still solid; macroeconomic pressures, rather than on-chain issues, are the main risks.