On April 8, 2026, the United States and Iran reached a conditional ceasefire, opening a brief window of geopolitical easing. However, despite multiple extensions of the ceasefire deadline, deep-seated conflicts over control of the Strait of Hormuz, the trajectory of Iran’s nuclear program, and the handling of frozen assets have remained unresolved.
As May began, tensions escalated sharply. On May 7, the US and Iran exchanged brief fire in the Strait of Hormuz, quickly intensifying maritime friction. The US immediately launched "Operation Freedom," imposing a naval blockade on Iranian ports, with no sign of de-escalation. Meanwhile, Iran’s Revolutionary Guard continued to organize merchant ship passages, asserting de facto control over the strait.
On May 23, the situation took a dramatic turn. Iranian Foreign Ministry spokesperson Baghai was appointed as the spokesperson for Iran’s delegation in US-Iran negotiations. Later that same day, Eastern Time, Trump posted on social media that a US-Iran agreement was "basically reached." Yet just a day later, the tone shifted abruptly: Trump instructed negotiators "not to rush into an agreement." The Iranian Foreign Ministry quickly followed, stating that the US and Iran had reached consensus on most issues, but "this does not mean an agreement will be signed soon." The cognitive gap between the two sides became starkly apparent in the current memorandum of understanding, which covers shipping in the strait and the nuclear negotiation framework.
Why Has the Strait of Hormuz Become a "Macro Black Swan" for Crypto Markets?
The Strait of Hormuz is a critical chokepoint for about 20% of global oil shipments. When this energy lifeline is threatened by military conflict, the transmission mechanism is both clear and profound: geopolitical conflict drives up oil prices, higher oil prices reinforce inflation expectations, rising inflation expectations push up risk-free interest rates, and ultimately, the valuation space for all risk assets—including cryptocurrencies—gets squeezed.
In mid-May, as US-Iran tensions continued to escalate, international crude prices quickly broke above $110 per barrel. According to Gate market data, as of May 20, Bitcoin dropped more than 5% within 24 hours, falling below $77,000. The transmission chain was especially evident in this event: oil prices surged → inflation expectations rose → US Treasury yields hit a short-term high of 4.85% → capital systematically exited risk assets.
This mechanism directly challenges the narrative of Bitcoin as "digital gold" and a safe haven. Data shows that in mid-May, the 30-day correlation coefficient between Bitcoin and the Nasdaq 100 Index climbed to 0.72, indicating that under systemic market stress, Bitcoin currently behaves more like a risk asset than a traditional safe-haven tool.
Bitcoin Drops Below $75,000: What Happened in the Leverage Market?
On May 23, reports of a possible US military strike on Iran triggered a rapid deterioration in market risk sentiment, leading to a broad sell-off in the crypto market. According to Gate market data, Bitcoin experienced extreme volatility between May 23 and 24, plunging from the $77,000 range and briefly approaching the $74,000 mark.
Coinglass data shows that during this downturn, about $400 million in long leveraged positions were liquidated in just 10 minutes. Bitcoin fell from a 24-hour high of $77,434 to $74,606, a 3.62% drop. Total liquidations across the market exceeded $500 million in 24 hours, affecting more than 120,000 traders. Many high-leverage long traders were completely wiped out amid panic.
How Did the "Basically Reached" Agreement Trigger a Violent Rebound and Liquidate 110,000 Traders?
The market reversal occurred in the early hours of May 24. Trump officially announced on Truth Social that a US-Iran agreement was "basically reached." Following the news, Bitcoin surged from $74,000 to $76,600.
This brief V-shaped rebound did not stabilize the market; instead, it triggered a textbook short squeeze. Coinglass data shows that in the 30 minutes of the price spike, about $180 million in short positions were liquidated. The buying pressure from these liquidations further fueled the rally, creating a chain reaction. In the past hour alone, total market liquidations reached $103 million, with short positions accounting for nearly $90 million. Over 110,000 traders lost their entire positions in the process.
As of May 25, according to Gate market data, Bitcoin stood at $77,500, up 0.7% in 24 hours. After rebounding from around $74,200 over the weekend, the market is now in a typical "post-drop recovery" phase, testing the $77,500 resistance zone.
The Fragile Balance of Market Sentiment and Structural Divides
Market sentiment remains in a highly uncertain and fragile state. The Crypto Fear & Greed Index has dropped to around 30, firmly in the "fear" zone and well below the previous neutral reading of 48.
Unlike past crypto market risk events (such as the 2022 Terra collapse or the FTX incident), this downturn was driven by external macro shocks. This means there has been no direct counterparty credit crisis or stablecoin depegging, and centralized exchanges’ BTC reserves have only declined slightly by about 1.2%. However, the high-risk exposure in the leverage market—especially the dense accumulation of long positions in the $73,000 to $74,000 range—means any geopolitical "black swan" could trigger mass liquidations. Coinglass data indicates that if Bitcoin falls below $73,800, over $1.29 billion in long leveraged positions would be at risk.
Key Variables and Potential Paths in the Next Stage of the Standoff
The central variable now is whether this memorandum of understanding can actually be converted into an enforceable ceasefire and strait navigation agreement. The main sticking points in negotiations are threefold: control over the Strait of Hormuz, the handling of Iran’s enriched uranium stockpile, and the arrangement for unfreezing $25 billion in Iranian assets.
Multiple sources indicate that the current draft agreement is only a broad framework. The Iranian Foreign Ministry has made it clear that "details of the nuclear issue are not being discussed at this stage," leaving a gap between the current framework and the comprehensive solution sought by the US. Trump’s insistence on maintaining the naval blockade until a formal signing further increases uncertainty over the agreement’s implementation.
Three scenarios are worth watching: If a 60-day ceasefire framework and reopening of the strait are achieved, market risk appetite could gradually recover, and Bitcoin may seek a new equilibrium in the $77,000–$80,000 range. If talks break down or military conflict reignites, oil prices could spike again, driving risk assets to new lows, with the $73,000–$74,000 leverage-heavy long zone becoming the epicenter of liquidations. If the agreement remains in limbo and continues to fluctuate, the market will enter a "headline-driven" high-volatility mode, with each negotiation statement’s wording steering short-term trading dynamics.
Summary
The ongoing Iran situation has become the most significant geopolitical factor in the crypto market in 2026. From Bitcoin plunging below $75,000 to a violent rebound, and from over 120,000 long liquidations to 110,000 shorts being squeezed, the crypto market has witnessed a full-scale long-short wipeout in the past 72 hours. As a chokepoint in the global energy supply chain, the Strait of Hormuz directly influences crypto asset pricing logic through its impact on inflation expectations and risk-free rates.
US-Iran negotiations remain highly uncertain. While a basic framework is in place, core disagreements—control of the strait and the future of the nuclear program—are unresolved. For leveraged traders, this means every negotiation statement in the coming weeks could trigger sharp directional swings. Market price discovery is shifting from technical analysis to geopolitical narratives, and in this narrative, the security of the Strait of Hormuz may now be the most important—and least predictable—variable in current crypto valuation models.
FAQ
Q: Where was the largest liquidation cluster when Bitcoin fell below $75,000?
According to Coinglass’s leverage liquidation heatmap, there is a dense cluster of over $1.29 billion in long leveraged positions around $73,800. If the market drops below this level, a chain reaction of liquidations will be triggered.
Q: How does the Iran situation transmit to the crypto market?
Geopolitical conflict drives up oil prices → higher oil prices reinforce inflation expectations → US Treasury yields rise → risk-free rates increase → valuations of crypto and other risk assets come under pressure. This is a multi-step, complete pricing chain.
Q: If the US-Iran agreement is ultimately reached, what does it mean for Bitcoin prices?
If a 60-day ceasefire framework and reopening of the Strait of Hormuz are implemented, market risk appetite could recover. However, the extent and sustainability of this recovery will depend on the specific terms of the agreement—especially how the strait is managed and the nuclear issue is addressed.
