Bitcoin's price fell 3% to trade below $71,000 as negotiations to end the US-Iran conflict broke down. The cryptocurrency shed recent gains following news of stalled talks in Islamabad, Pakistan, and a subsequent demand from US President Donald Trump to reopen the Strait of Hormuz.
This geopolitical instability is raising concerns about increased inflation, with models suggesting a rise to 4.0% if the Strait of Hormuz remains closed. The breakdown in diplomacy also led to significant liquidation of Bitcoin long positions, with totals nearing $350 million in the past 24 hours.
Analysts suggest that continued war escalation could force the Federal Reserve to inject liquidity into the economy despite rising inflation, as concerns grow over potential US recession.