War Escalation or Hawkish Fed Pivot Could Turn Bitcoin Outlook Bearish

Rising geopolitical tensions and stubborn inflation risks could turn bearish for bitcoin, with Wintermute warning that further Middle East escalation or a hawkish Federal Reserve pivot may pressure markets already on edge.

Bitcoin Steady as Oil Spike and Middle East Tensions Rattle Markets

Bitcoin held modest gains during a broad market selloff as escalating tensions in the Middle East sent oil prices sharply higher and rattled global markets, according to a March 9 market update from crypto market maker Wintermute. The report noted that Brent crude jumped 26% during the conflict’s second week amid Strait of Hormuz supply fears, while bitcoin rose roughly 0.4% as equities, bonds, and gold fell.

The update followed U.S. efforts to escort and insure oil shipments through the Strait of Hormuz after escalating military operations raised concerns about disruptions to one of the world’s most important energy routes. Roughly 20% of global oil supply normally passes through the strait, making it a critical chokepoint for energy markets. The firm said bitcoin held relatively steady while major equity benchmarks declined.

On Tuesday, March 10, bitcoin traded near $70,000–$71,500, even as oil prices pulled back from recent highs after reports of potential de-escalation in the region. Wintermute wrote:

“Whether bitcoin acts as a credible inflation hedge remains debated, but moments like this do more to build that narrative than any number of theoretical arguments.”

Derivatives data suggests crypto traders remain cautious. Volatility remains elevated, with DVOL — the Deribit bitcoin volatility index that tracks implied volatility in bitcoin options — trading in the 60s after spiking the previous week, according to the report. Options markets show persistent put skew, signaling continued demand for downside protection. Some investors have also begun accumulating longer-dated out-of-the-money call options tied to a 12–to 18-month recovery outlook.

The report references crypto leverage at about $60 billion, roughly half of earlier cycle peaks, which the firm said reduced forced selling during the broader risk-off move. The update noted: “Marginal sellers are gone (for now), but conviction buyers aren’t here yet.” Spot trading volumes remain relatively light, though institutional participation has increased modestly.

Traders are now focused on the upcoming Federal Open Market Committee meeting for signals on inflation and energy-driven price pressures. Wintermute warned: