The flames of war between Israel and Palestine have "burned" into the crypto market.

In the past two weeks, the world's attention has focused on the Middle East.

As the two most important powers in the Middle East, the conflict between Iran and Israel not only signifies a sudden break in the surface peace of the region, escalating chaos, but also further stirs global unrest. Currently, this war ignited by nuclear tensions has not only drawn Iran and Israel into a deep conflict, forcing proxy wars to evolve into a direct confrontation, but has also compelled the United States to quickly intervene, with the situation gradually escalating.

Under risk aversion, global markets are in turmoil, with hard assets like gold and the US dollar rising rapidly, while the risk markets are in a state of alarm. It must be acknowledged that the flames of war between Israel and Palestine are also spreading to the cryptocurrency space.

To discuss the recent Israel-Iran conflict, one cannot avoid the issue of Iran's nuclear program. In fact, Iran's nuclear program began earlier than one might think. As early as 1957, during the Cold War, to prevent the Soviet Union's influence from spreading southward, the United States signed the "Civil Nuclear Cooperation Agreement" with the pro-American Pahlavi dynasty of Iran, marking the beginning of Iran's nuclear program.

In 1967, under the agreement, a 5-megawatt research nuclear reactor provided by the United States to Iran was inaugurated at the University of Tehran. In 1968, Iran signed the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), formalizing its legal status as a peaceful use of nuclear energy in the international nuclear non-proliferation regime. The oil crisis of the 70s of the 20th century further catalyzed Iran's nuclear industry, relying on high-yield oil exports, and in 1974, Iran established the Atomic Energy Organization (AEOI) and began nuclear technical cooperation with countries around the world. By 1979, with about 80 percent of the two reactors at the Bushehr nuclear power plant completed, Iran had initially established a relatively comprehensive nuclear industrial system.

The turning point occurred during the Iranian Islamic Revolution. After the revolution, Iran shifted from a secular monarchy to a theocratic state, marking the end of the honeymoon period between the United States and Iran. The Khomeini regime was fully anti-American, and the U.S. classified Iran as a blockade zone, while the nuclear program, as a symbolic product of U.S.-Iran cooperation, fell into silence. After the Iran-Iraq war, Khomeini realized the importance of a modern military system and began to embrace the Soviet Union and other countries, signing the "Agreement on Peaceful Use of Nuclear Energy" with Russia in 1992, leading to the initiation of high-intensity cooperation between the two.

Since the Iranian nuclear issue was first exposed to the international community in 2002, Iran has engaged in multiple rounds of multilateral negotiations with other countries regarding the nuclear issue over the following decades. In 2015, Iran signed the Joint Comprehensive Plan of Action (JCPOA) with the six countries of the US, UK, France, Germany, Russia, and China, which temporarily froze its uranium enrichment activities and led to the easing of Western sanctions. However, the rise of Trump introduced uncertainty into the situation, as the US unilaterally withdrew from the agreement in 2018 and reimposed severe sanctions. As a result, Iran adopted a more proactive strategy in its nuclear industry and successfully deployed the IR-6 centrifuge in 2023, with its enrichment efficiency increasing fivefold compared to the agreement period. According to the latest data from 2025, the International Atomic Energy Agency (IAEA) reported that Iran has accumulated 408 kilograms of uranium enriched to 60% purity, nearing the threshold for weapons-grade nuclear material.

In April of this year, the Trump administration announced the resumption of nuclear negotiations with Iran. However, in early June, on June 12, 2025, the United Nations nuclear oversight body, the International Atomic Energy Agency (IAEA), officially determined that Iran had not complied with its nuclear obligations, leading to a breakdown in negotiations and a rapid deterioration of the situation in the Middle East. Amid this, Israel became the most restless country.

The conflict between Israel and Iran has a long history, with the absolute opposition of religious ideologies determining the underlying antagonism that is difficult for both sides to avoid. Moreover, the struggle for geopolitical dominance has further escalated this conflict. On one hand, Iran is establishing a Shiite crescent to encircle Israel, while on the other hand, it is intensifying its nuclear technology efforts. In the face of survival anxiety, Israel, which already lacks strategic depth, is retaliating fiercely, and the tacit support from the United States has emboldened Israel. In various aspects, Israel and Iran are presenting a stance of mutual confrontation. Their proxy wars have become a fundamental aspect of the Middle Eastern situation in recent years, but this time, the concealed proxy wars have quickly transformed into a mode of open confrontation.

On June 13 local time, the Israeli Air Force launched open airstrikes against dozens of nuclear facilities and military targets within Iran, codenamed "Operation Lion's Strength." Iran, unwilling to back down, launched a series of missile and drone attacks against Israel. Subsequently, both Israel and Iran intensified their strikes against each other, prompting international intervention. In fact, reviewing the timeline of the Israel-Iran conflict, the United States can be deemed the instigator. Due to profound contradictions between the U.S. and Iran surrounding geopolitical issues, ideological differences, historical grievances, and regional hotspots, the U.S. chose to support Israel to curb Iran's development. During this conflict, while the U.S. publicly proclaimed peace negotiations and exerted pressure on Iran through public opinion without intervening, it simultaneously ordered the U.S. military to destroy three Iranian nuclear facilities on June 21, which not only increased the likelihood of escalating the conflict but also significantly complicated the situation, thereby threatening global security.

Geopolitics has always been a core concern of the global financial market, and the impact of the U.S. entry continues to amplify. In response to this move by the U.S., Iran has proposed closing the Strait of Hormuz, which handles about one-third of the world's maritime crude oil trade, triggering global panic. Today, international crude oil futures opened more than 5% higher, and international gold prices briefly surpassed $3,400.

The risk market is not so good. With the intensification of risk aversion, the futures of the three major U.S. stock indexes opened lower, and the crypto market suffered a heavy setback. In the past three days, the crypto market has fallen continuously, yesterday Bitcoin fell below the 100,000 mark, the lowest touched $98,000, and is now trading at $101961, the copycat plate has plummeted, ETH is back above $2,200, and SOL has come to $130 again. According to Coinglass, as of 9 a.m. this morning, about $559 million has been liquidated on the entire network in the past 12 hours, with $452 million in long orders and $107 million in short positions. Among them, Bitcoin liquidated $223 million, and Ethereum liquidated $156 million.

On the other hand, the flames of war between Israel and Iran not only ignite the risk-averse sentiment in the crypto market but also quickly spread to the domestic crypto industry of both sides. On the afternoon of June 18, the mysterious hacker group Gonjeshke Darande claimed to have launched a large-scale attack on the Iranian cryptocurrency exchange Nobitex, successfully obtaining its source code, internal network data, and customer asset data. As of now, nearly 90 million dollars in crypto assets have been affected, most of which are stablecoins USDT. It is worth noting that even though the exchange has been compromised, on-chain data shows that most of the funds have not been transferred but rather directly destroyed, which seems more like a form of protest.

The hacker clearly stated the reasons for the attack, saying "Nobitex exchange is at the core of the Iranian regime's funding of global terrorism, and cooperating with the infrastructure that supports the Iranian regime's terrorism and sanctions violations puts your assets at risk." Although the hacker group has never revealed its identity, many industry experts believe that, given its precise strikes against Iran multiple times from 2022 to the present, it is linked to Israel's military intelligence unit, the famous Unit 8200.

It must be acknowledged that the hackers' strikes are remarkably precise, and this indeed obstructs the flow of funds between Iran and the outside world. Due to years of suffering from sanctions and inflation, the local cryptocurrency industry in Iran has actually developed quite rapidly. According to data provided by Maria Noor, there are currently 90 cryptocurrency exchanges operating in Iran, with more than 10 functioning as centralized exchanges, offering websites and applications for user access. Approximately 15 to 19 million Iranians are active in the cryptocurrency market, accounting for about one-fifth of Iran's total population. This clearly shows that the cryptocurrency market has become one of the important means for Iran to conduct transactions with the outside world.

Nobitex, the largest exchange in Iran, was attacked this time, having 6 million active users and an annual trading volume of up to 68 million transactions, with a market share of nearly 87%. Reuters has previously reported on this project, stating that the vast majority of domestic cryptocurrency trading in Iran is connected to the international market through Nobitex or similar exchanges.

In addition to cryptocurrencies, the Iranian government has also invested significantly in the industrial application of blockchain technology, having launched official blockchain projects Kuknos and Borna to enhance and improve financial infrastructure. Although supportive of blockchain technology, the Iranian government's attitude towards the ongoing development of cryptocurrencies in the region can be described as quite nuanced.

First of all, in the field of mining, Iran's attitude is very ambiguous. In contrast to other regions, where mining farms are overwhelmingly dominant, Iran's mining industry is dominated by retail investors. In 2018, Iran became a popular global mining destination by legalizing the mining industry, attracting a wide range of miners to pan for gold in the region. Under the rigid demand of transactions, local retail mining is not uncommon. Some 300 mining projects have been approved by the government, but according to Masih Alavi, CEO of ViraMiner, the legal mining scale in Iran is only 5 megawatts, while the underground scale of illegal mining is close to 2GW, which is 400 times that of legal mining, which is equivalent to 5% of Iran's total electricity consumption in 2023, according to Wu said. In 2020, Iran's central bank announced a ban on the use of illegal mining currencies in the territory of individuals, and in December 2024, the government explicitly banned the promotion of crypto mining machines.

The negative attitude towards cryptocurrency trading is even more pronounced. In the face of cryptocurrency eroding the sovereignty of official currency, Iran has taken strong measures, repeatedly trying to block exchanges between cryptocurrency and the rial, and restricting the outflow of local funds. Earlier this year, the Central Bank of Iran temporarily halted all rial payments at cryptocurrency exchanges, requiring all exchanges to use government-designated interfaces for transactions to achieve fund tracking and user monitoring. In February, Iran explicitly prohibited any local advertisements for cryptocurrencies. After Nobitex was attacked, the Central Bank of Iran further implemented a cryptocurrency curfew policy, strictly regulating domestic crypto platforms to operate only between 10 AM and 8 PM.

The various restrictions and regulations reflect the official's apprehension towards cryptocurrency. On one hand, under the current conditions of isolation, cryptocurrency serves as an important means for the development of the local industry and obtaining foreign exchange, acting as a significant trading window for Iran. Objectively, there is a rationale for its existence. On the other hand, due to the dual impacts of cryptocurrency on monetary sovereignty and the electricity loss associated with the mining industry, the authorities cannot allow it to develop freely; they can only attempt to strike a balance between innovation and regulation. This point also resonates in the religious sphere; in the highly centralized theocracy of Iran, speculative cryptocurrencies carry an inherent taboo. Traditional religious conservatives harbor considerable disdain for them, yet Iran's Supreme Leader Khamenei believes in maintaining an attitude of progressiveness. The open-minded and conservative factions maintain a delicate balance on this issue.

Of course, whether acceptance or opposition, from the current situation, the flames of the Israel-Iran war have clearly spread from the physical space to the cyberspace and further into the financial sector. As part of this, the cryptocurrency field is also forced to confront this impact. For Iran, the attacks on exchanges may just be the beginning, and the subsequent game between the two sides regarding this will only present more complex, more sophisticated, and more hidden characteristics.

For the global cryptocurrency industry, geopolitical factors will become the absolute main line of the market in the short term, and risk aversion sentiment will greatly influence the trend of cryptocurrencies. Currently, due to frequent positive developments within the industry, the sentiment remains relatively mild, and market fluctuations are also relatively controllable. Bitcoin has strong support at $98,000, and there is a trend of BTC exiting from exchanges. Additionally, Bitcoin ETFs had a net inflow of $1.02 billion last week, all indicating that the market still holds a positive attitude towards Bitcoin. However, the U.S. entry brings a high degree of uncertainty, and the scope and extent of its involvement will have a wide-ranging impact on the battlefield. If it leads to the closure of the Strait of Hormuz, the market will face even greater fluctuations.

In addition, it is worth noting that as the conflict leads to a rapid rise in oil prices, the Federal Reserve, which has been wavering between tariffs and inflation, will open a longer observation window. Maintaining high interest rates in the third quarter is gradually becoming a consensus in the market, and this move will have a more profound impact on the cryptocurrency market.