Bitcoin jumps on truce hopes, crypto markets react – but risks remain
Bitcoin surged nearly 5% on Wednesday, hitting a three-week high of $72,738, fueled by the brief truce between the United States and Iran and escalating hopes for a reopening of the Strait of Hormuz. The rally wasn’t uniform, with smaller cryptocurrencies like Ether also seeing significant gains.
Volatility lingers amidst geopolitical uncertainty
The initial spike followed President Trump’s announcement of a two-week suspension of military strikes against Iran, triggering a rebound in risk assets. However, analysts warn that market sentiment remains fragile, with continued volatility expected until a definitive resolution emerges. ‘Bitcoin experienced a strong rebound this morning following the temporary truce and the relief that, for now, a further escalation has been averted,’ commented Caroline Mauron of Orbit Markets. ‘The crypto markets are likely to be driven by stock and commodity movements today.’
Despite the positive initial momentum, the broader cryptocurrency landscape remains complex. ETF data reveals a notable shift: a massive $471.3 million net inflow into Bitcoin spot ETFs on Monday, adding to the $22.3 million accumulated the previous week. This represents a stark contrast to the nearly $300 million outflows seen the week prior. March witnessed approximately $1.3 billion in net inflows, marking a stabilization after four consecutive months of outflows beginning in November 2025. The digital asset has fallen over 40% from its peak above $126,000 in October.
Inflation and federal reserve policy – the key drivers
Looking ahead, several factors could determine Bitcoin’s trajectory. Jeff Mei, BTSE’s Director of Operations, emphasized the importance of oil and gas supply recovery and its impact on inflation. ‘The possibility of a bull market hinges on how the oil and gas supply recovers in the coming months and its impact on inflation,’ he stated. ‘If inflation falls sufficiently and the Federal Reserve decides to resume interest rate cuts, a rally in cryptocurrency prices could materialize.’
Ivan Lim, a senior derivatives trader at FalconX, noted that while the short-term outlook is cautiously optimistic, sustained volatility is anticipated until a final agreement is reached. The International Monetary Fund’s chief warned of a bleak economic outlook, advising governments to brace for the ‘worst.’ And while the crude oil price plunged and stocks rose following Trump's intervention, the underlying tension remains—a reminder that geopolitical risks are a persistent drag on global markets. The situation underscores the delicate balance between risk appetite and underlying economic vulnerabilities.