Why did Bitcoin drop today? The U.S. shot down an Iranian drone, and funds are fleeing to gold and silver.

Bitcoin fell below 73,000 on Tuesday, hitting a new low since Trump’s election. The U.S. shooting down an Iranian drone sparked a risk-off sentiment, with gold rising 6.7% and silver surging 10%. Glassnode shows 44% of Bitcoin supply is in loss, with $663 million in liquidations. RSI hit 30; referencing 2022, it may drop another 20% to test $60,000.

US-Iran Drone Conflict Sparks Risk-Off Wave

The trigger for Bitcoin’s decline today was the sudden escalation of Middle East tensions. Reuters reporter Idrees Ali posted on social platform X on Tuesday that the U.S. Navy shot down an Iranian drone approaching the aircraft carrier “Abraham Lincoln” in the Arabian Sea. In another post, he said this Iranian “Witness-139” drone was shot down by an F-35 fighter jet.

U.S. Central Command spokesperson Tim Hawkins said Tuesday that U.S. forces shot down an Iranian drone in the Arabian Sea, describing it as “provocative” as it approached the “Abraham Lincoln” aircraft carrier. Hawkins stated, “Lincoln” was operating in the Arabian Sea about 500 miles off Iran’s southern coast. An Iranian “Witness-139” drone was targeted, and an F-35C stealth fighter from the “Lincoln” shot it down.

White House Press Secretary Levitt later confirmed in an interview with Fox News that U.S. forces shot down an Iranian drone, and said the schedule for talks between U.S. special envoys and Iran later this week remains unchanged. This conflicting situation of military conflict and diplomatic dialogue has heightened market uncertainty about Middle East developments.

The sudden news of U.S.-Iran tensions triggered a risk-off move, with funds flowing into gold assets. Despite declines in stocks and Bitcoin, gold and silver prices surged sharply, continuing recent volatility. Gold futures rose 6.7% to $4,965 per ounce, approaching the $5,000 mark. Silver futures jumped 10% to about $85 per ounce, continuing its vertical ascent. According to FactSet data, gold has outperformed Bitcoin as a safe haven over the past five years.

Geopolitical Logic Behind Bitcoin’s Drop Today

US-Iran Military Clash: F-35 shootdown of Iranian drone triggers war risk premium

Risk Asset Divergence: Gold and silver soar, Bitcoin plunges, digital gold narrative collapses

Capital Flow Shift: Investors sell risk assets to hedge with physical precious metals

Gerry O’Shea, Head of Global Market Insights at Hashdex, said via email: “The divergence between Bitcoin and gold indicates that most investors currently see gold as the primary store of value, especially during periods of currency devaluation, geopolitical turmoil, and macroeconomic uncertainty.” This divergence is the core reason why Bitcoin is down today.

Trump Policy Halo Fades, 40% Bitcoin Drop Contradicts Promises

Tuesday’s market was tense, with stocks falling and Bitcoin dropping to its lowest since November 2024. The Dow fell 167 points, down 0.34%, with a intraday plunge of 575 points. The S&P 500 declined 0.84%, and the Nasdaq dropped 1.43%. Both indices posted their biggest single-day declines in two weeks, led by tech and software stocks.

Risk-off sentiment caused Bitcoin to tumble nearly 7% early, breaking below 73,000 USD, the lowest since Trump’s presidential victory. It later rebounded slightly, trading around $76,800. Since hitting a record high above $126,000 in October, Bitcoin has fallen about 40%.

Trump’s administration had strongly promoted pro-cryptocurrency policies, with the president himself promising to make the U.S. the “world’s crypto capital.” Despite Washington’s support, Bitcoin has remained sluggish since its October peak. This disconnect between policy optimism and price action is the most ironic reason for today’s decline. Trump’s firing of SEC Chair Gensler, plans for a Bitcoin national reserve, and allowing pensions to invest in crypto should theoretically boost Bitcoin, yet the market responded with a 40% drop.

Given Trump’s support for the crypto industry during his campaign, his election was seen as a catalyst for the overall crypto market. Bitcoin soared to a record $126,080 on October 6 last year. Since then, its price has been declining. Other major and minor crypto assets have followed similar trends. Ethereum fell over 9% below $2,200, SOL dropped over 7% below $100, and XRP declined 6.6% to about $1.52.

Crypto-related stocks also performed poorly. Coinbase shares fell over 6%, and Strategy, which focuses on Bitcoin, dropped over 8%. Strategy’s sharp decline is especially concerning because its average cost basis is around $76,000, and current prices have fallen below that, resulting in unrealized losses.

ETF Rebounds Then Crashes — A Fragile Rally

(Source: Trading View)

Despite a brief recovery in the crypto ETF market on Monday, with spot Bitcoin ETFs recording a net inflow of $561.9 million, reversing two weeks of outflows, Tuesday saw declines again. This “rebound then crash” pattern is a key reason why Bitcoin is down today, showing market confidence remains extremely fragile, and any rally is unlikely to last.

A Bitfinex analyst wrote in a report on Monday: “Although Bitcoin and Ethereum ETFs experienced large redemptions (about $1.5 billion and $327 million respectively from Jan 26-30), some altcoin-focused products still attracted inflows, with net assets in Solana and XRP ETPs.” This capital movement among different crypto assets indicates investors are not completely exiting but reallocating.

“Derivatives markets have intensified recent declines, especially in Ethereum, where single liquidations reached about $220 million. Analysts believe this is the necessary release of leverage remaining in the altcoin market before a sell-off wave,” according to Coinglass data. Over the past hour, over $122 million in long positions and $26 million in short positions were liquidated, with total liquidations over the past day reaching $663 million.

Glassnode account manager Sean Rose noted that, given Bitcoin’s roughly 30% decline from its recent high of $108,000 over the past month, 44% of Bitcoin supply is “in loss.” This has caused the “profit-supply” to drop from 78% to 56%, indicating that wavering investors may continue to sell. Rose said, “Investors who bought near the all-time high are now in loss. The supply concentrated at near recent highs and at costs close to those highs is under pressure. The confidence and patience of these investors will be tested over the coming weeks and months.”

Bitcoin’s Relative Strength Index (RSI) is currently near oversold at around 30. The last time RSI was this low was near the 2022 bear market bottom, when Bitcoin’s price subsequently fell another 20%. If a similar pattern occurs today, it could mean Bitcoin drops to around $60,000. This historical reference provides the most frightening answer to why Bitcoin is down today: it may just be the start of a larger decline.

Recent price declines seem driven by multiple factors, including potential U.S. government shutdown macroeconomic uncertainty. O’Shea said that as the crypto industry seeks clearer regulation and integration into mainstream financial infrastructure, he expects Bitcoin to continue fluctuating in the short term, but believes its appeal will grow. This long-term optimism with short-term pessimism is the prevailing market consensus.