Market Turmoil Deepens as Bitcoin and Stocks Face Risk Aversion
By John Nada·Mar 21, 2026·4 min read
Bitcoin's decline reflects broader market risk aversion amid geopolitical tensions. Investors are reevaluating risk across assets, signaling a fragile recovery.
After a strong start to the week, Bitcoin (BTC) is down nearly 5%, alongside the S&P 500, DOW, Nasdaq, and Gold. Crude oil, on the other hand, has risen 7.30% and is up 53% since the US and Israel–Iran war began on February 28. The collective market weakness highlights a coordinated shift in capital flows as the war continues in the Middle East, triggering a notable uptick in outflows from major exchange-traded funds (ETFs) like the S&P 500 and Nasdaq 100. This trend emphasizes traders’ decision to cut risk in response to increased geopolitical uncertainty.
The Kobeissi Letter reported a staggering $64 billion outflow from the S&P 500 (SPX) ETF and Nasdaq 100 ETF (QQQ) over the past three months, marking the largest outflow on record. This significant reversal follows a $50 billion inflow seen in November, thus pushing outflows to 5% of the total assets under management. Such a dramatic shift underscores the growing apprehension among investors, who are increasingly retreating from what they perceive as riskier assets.
Spot Bitcoin ETFs have mirrored this broader market weakness, recording $253 million in outflows over just the past two days. While monthly ETF flows remain positive at $1.48 billion, this figure is overshadowed by the $6.3 billion in cumulative outflows recorded between November and February, highlighting a fragile recovery in investor demand. This environment suggests that while there is still some interest in Bitcoin, the prevailing sentiment remains cautious and influenced heavily by external factors.
Market data from Glassnode indicates that the cryptocurrency market is struggling to absorb the selling pressure that has intensified in recent days. The net realized profit-taking briefly accelerated to around $17 million per hour (24-hour average) before losing momentum, leading Bitcoin’s price to slip back below the $70,000 mark. Glassnode suggests that broader geopolitical uncertainty is compressing demand depth, which limits the market's capacity to absorb even moderate realization events. This situation has resulted in a stark reduction in liquidity, creating a challenging landscape for Bitcoin traders who are increasingly wary of market conditions.
Comparisons are being drawn between the current geopolitical climate and past events, notably the Russia-Ukraine conflict in 2022. Market participants have pointed out that the ongoing US and Israel–Iran war has parallels with the war that began in February 2022. A crypto commentator noted that following Russia’s invasion of Ukraine on February 24, 2022, Bitcoin initially experienced a sell-off before attempting a 24% relief bounce in the following four weeks. However, this recovery was short-lived, as Bitcoin ultimately dropped another 64% by November 2022.
A similar sequence seems to be unfolding this month, with Bitcoin initially rallying nearly 10% at one stage last week since the onset of the war, but that momentum is now slowing. The crypto commentator linked the current weakness to sustained pressure on liquidity, rising energy costs, and continued forced selling during periods of stress, all of which reduce the follow-through demand for Bitcoin. This pattern points to the likelihood of a more extended stabilization phase, where the recovery may take time as capital rebuilds and the selling pressure clears.
Crypto analyst Finish has expressed the belief that Bitcoin may need to find a bottom around $55,000 before a meaningful recovery can occur. Finish highlighted the sentiment that until the Iran war is settled, it will be challenging for Bitcoin to rise significantly. The environment is currently risk-off, with the S&P 500 losing trillions in capitalization, leading to a more neutral stance among investors.
The implications of this market behavior extend beyond immediate price action. As investors reevaluate their exposure to cryptocurrencies alongside traditional assets, the interconnectedness of these markets becomes increasingly evident. The capital exodus from traditional markets is causing a ripple effect in the cryptocurrency realm, where Bitcoin and other digital assets are experiencing similar declines. The prospect of a prolonged stabilization phase looms, with recovery becoming contingent on improved macroeconomic conditions and investor sentiment.
This current environment highlights the necessity for caution and a strategic approach to asset management. As the geopolitical landscape remains fraught with uncertainty, traders and investors are advised to carefully assess their positions and the potential risks involved. The ongoing tension in the Middle East, coupled with volatility in energy markets, continues to shape the outlook for Bitcoin and other risk assets, suggesting that the path forward may be fraught with challenges. Investors should remain vigilant, as the dynamics of the market are heavily influenced by external factors that can rapidly change the landscape.