Bitcoin dropped below $77,000 on Sunday night as escalating geopolitical tensions and renewed inflation worries rattled global markets and drove investors into a risk-off stance.
Bitcoin slides as risk-off mood deepens
Bitcoin fell below $77,000 on Sunday night amid escalating tensions between the United States and Iran and renewed concerns about inflation that pushed global markets into a risk-off stance.
The token slipped 1.2% over the past 24 hours to $76,593 as of 11:10 p.m. ET, after briefly touching $76,720. Traders say support is forming near $74,000, but they expect volatile, headline-driven sessions in the days ahead.
From $82,000 highs back to âfearâ
Just days earlier, bitcoin had traded near $82,000, supported by strong inflows into spot exchange-traded funds (ETFs) and optimism around the U.S. Digital Asset Market Clarity Act.
Sentiment has since deteriorated. The widely watched Fear & Greed Index dropped to 27, sliding back into the âfearâ zone after hovering in a neutral 40â50 range earlier in the week, signaling a broad pullback in risk appetite.
Trump warning to Iran sparks oil rally
The latest leg lower in crypto followed a social media statement from U.S. President Donald Trump, who warned Iran of possible military action if peace talks fail to progress.
The remarks triggered a jump in energy prices. Brent crude climbed 1.78% to $111.20 per barrel, while West Texas Intermediate (WTI) crude rose 2.2% to $107.70. Rising oil prices heightened worries that global inflation pressures could re-accelerate.
Inflation worries fuel rate jitters
The spike in crude oil fed expectations that the Federal Reserve may keep interest rates higher for longer.
Bond markets quickly repriced that risk: government bond yields surged to 12âmonth highs, and data showed broad selling across sovereign debt. The yield on the 10âyear U.S. Treasury note reached 4.63% on May 18, reinforcing the market view that borrowing costs are likely to stay elevated.
The backdrop to this move is a clear pickup in U.S. inflation. The annual inflation rate rose to 3.8% for the 12 months ending in April, up from 3.3%. A 17.9% jump in energy costs was a major driver of the increase, strengthening expectations that the Fed will remain on hold.
Many economists now project that policymakers will keep rates steady through the end of 2026, with potential cuts pushed into 2027. That outlook is weighing on risk-sensitive assets, including digital currencies.
Crypto ETF flows reverse after strong run
Risk aversion also showed up in digital asset fund flows. Bitcoin-focused ETFs recorded net outflows of about $1 billion for the week ending May 17, according to data from SoSoValue. That move ended a sixâweek streak of net inflows into the products.
Analysts attributed the reversal to shifting portfolio strategies as traders adjusted to delayed expectations for rate cuts and a more persistent inflation environment. The cooling in ETF demand has reduced one of the key supports behind bitcoinâs recent push toward record levels.
Macro and policy signals steer bitcoin
Market watchers say bitcoin is increasingly trading in line with broader macro indicators rather than purely crypto-specific factors.
Traders are closely tracking upcoming U.S. inflation releases and movements in Treasury yields as short-term guides for price direction. A further rise in yields or upside surprise in inflation could pressure bitcoin and other risk assets, while signs of easing price pressures might provide some relief.
The next key inflation report is scheduled for June 10 and is expected to be a major catalyst for both traditional and digital markets.
Clarity act advances but outlook still uncertain
On the regulatory front, the Digital Asset Market Clarity Act advanced out of the U.S. Senate Banking Committee on May 14, marking a step toward a clearer framework for digital assets.
However, the bill still faces several hurdles. It must pass a full Senate vote and then be reconciled with a separate version approved by the House in July 2025 before it can become law. Progress on this legislation could help support sentiment in the digital asset space if momentum continues, but uncertainty over timing and final content remains high.
Fed communication and geopolitics in focus
Analysts also point to upcoming remarks from Federal Reserve Chair Kevin Warsh as a near-term driver of market tone. Any shift in language around inflation risks or the rate path could quickly filter through to crypto markets, given their sensitivity to liquidity conditions and real yield expectations.
At the same time, geopolitical headlines remain a major swing factor. Further statements from Trump regarding the Iran conflict, or any escalation on the ground, are expected to have an immediate impact on oil prices and, by extension, on inflation expectations and market risk appetite.
For now, traders are bracing for choppy trading conditions, with bitcoinâs price path closely tied to developments in geopolitics, inflation data and central bank policy signals.
Worried about this BTC drop? Learn how seasoned traders navigate volatility in our guide on Bitcoin trading strategies.
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