According to analysts, the ongoing military conflict between Israel and Iran could have a significant impact on the digital asset space. In case of a negative outcome, the crypto market may face a steep sell-off, dragging down major assets and even affecting fiat currencies.

Bitcoin is struggling below resistance

Bitcoin began a new decline after failing to break above the $108,800 resistance zone. The flagship cryptocurrency dropped below $107,000 and tested the $103,500 level. A bottom formed near $103,400, and BTC is now consolidating its losses. On early Wednesday, June 18, Bitcoin was trading at $104,915, attempting to recover lost ground.

Analysts note that BTC is currently in a phase far from market overheating. According to the Index Bitcoin Cycle Indicators (IBCI) from CryptoQuant — a platform that has tracked Bitcoin cycles for over a decade — the asset is in a neutral zone that could quickly shift into either a downturn or a new rally.

The market is choosing a direction

IBCI currently shows a stable reading around 50%, indicating that Bitcoin remains in the neutral phase of its current bull cycle. This suggests that the market has not yet entered the overheated zone typical of peak rallies. Moreover, there is no aggressive profit-taking, which usually marks the end of a bull run.

"Historically, such equilibrium phases emerge between the end of one growth wave and the beginning of the next," CryptoQuant notes. The current neutral IBCI zone provides room for further upside in Bitcoin's price and allows miners to maintain profitability. The absence of mass euphoria implies that the crypto market has not yet exhausted its bullish potential.

Short-term technical picture

On the 1-hour chart of BTC/USD, a short-term triangle has formed with support at $104,200. The nearest resistance lies around $105,200, followed by a key resistance level at $106,200. This corresponds to the 50% Fibonacci retracement from the decline between the $108,924 high and the $103,400 low.

A close above $106,200 could trigger a further rally. In that case, BTC may retest the $108,000 resistance and possibly climb toward the psychologically significant $110,000 mark.

Will Bitcoin extend its losses?

If Bitcoin fails to break above the $106,200 resistance zone, it could initiate another downward move. The first major support now lies at $103,500, followed by $102,500. A deeper pullback could send BTC toward $101,200. The key support remains at $100,000 — a breach of this level could lead to a strong bearish impulse.

How BTC will react if the US intervenes in the Israel-Iran war

Should the United States officially enter the Israel-Iran conflict, Bitcoin and the broader crypto market are likely to see a sharp decline. Analysts predict a flight to safety across global markets, with liquidity exiting volatile assets. A full-scale war would likely send oil prices soaring — a scenario unfavorable for the Fed, which would then be forced to hold off on rate cuts or even consider tightening policy.

An escalation in the Middle East would disrupt supply chains and raise logistics costs globally, affecting businesses worldwide. The Fed could be forced to choose between supporting the economy and fighting inflation. If the latter prevails, real yields would rise, putting additional pressure on the crypto market.

BTC could drop sharply if the US gets involved

At present, Bitcoin remains in relative equilibrium, but a rapid escalation could wipe out 10–20% of its value — a pattern seen during previous geopolitical crises.

Traditional financial markets wouldn't be immune either. In times of war, investors typically rotate into safe havens like the US dollar, gold, and Treasuries. In contrast, cryptocurrencies are viewed as high-risk assets in such scenarios, prompting investors to steer clear of digital tokens during heightened stress.

If US involvement is short-lived and leads to a quick truce, markets could rebound. Historically, Bitcoin has recovered within 4–6 weeks following similar conflicts, though surprises can't be ruled out this time.

Long war = prolonged crypto turbulence

If the war drags on or spreads across the region, the crypto market could enter an extended period of turbulence. Liquidity would dry up, and prices would remain under pressure.

Currently, Bitcoin has failed to benefit from risk-on sentiment in financial markets. The ratio between US equities and Treasury yields has reached new highs. Meanwhile, the S&P 500 rallied on reports that Iran may be open to resuming negotiations with the United States — fueling optimism that the worst of the Middle East crisis may be over.

Still, market participants may be overly optimistic, confusing hopes with reality. The conflict shows no signs of easing, and the longer it persists, the more global risk appetite will deteriorate. As a result, US stock indices and the crypto market — especially Bitcoin — could suffer. However, the sooner hostilities between Tehran and Jerusalem end, the higher the chances for BTC/USD to resume its bullish trend.