BlockByte Weekly: How Does Bitcoin Perform During Periods of Conflict?

Weekly Snapshot

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• BTC: US $67,511 (-0.1%)
• ETH: US $1,972 (-2.6%)
• Crypto Market Cap: US $2.29T (-0.7%)
• Gold: US $5,382/oz (+3.6%)
• S&P 500: 6,878 (+0.3%)
• ASX 200: 9,198 (+2.1%)

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Executive Summary

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• The U.S. and Israel launched a major joint military strike against Iran on 28 February, with Trump claiming Supreme Leader Khamenei has been killed; bitcoin and gold lift on the news.

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• Terraform Labs' bankruptcy administrator has sued Jane Street for alleged insider trading tied to the 2022 Terra Luna collapse, alleging the firm used non-public information to front-run a US $40 billion market wipeout.

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• Google searches for "How To Buy Bitcoin" have surged to a five-year high, echoing patterns from previous cycle bottoms where retail fear and curiosity converge before major recoveries.

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U.S.-Israel offensive targets Iran's leadership - Bitcoin & Gold Respond

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On 28 February, the U.S. and Israel launched "major combat operations" against Iran, targeting political leadership, military infrastructure, and nuclear facilities. Israeli and U.S. officials claim Supreme Leader Khamenei was killed in an airstrike on his Tehran compound; Iran denies this. The Iranian Red Crescent reported over 200 killed and 700 injured. Iran retaliated with strikes against U.S. bases, Israel, and Gulf states including Saudi Arabia, the UAE, and Qatar.

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Despite an initial 4% sell-off, bitcoin is up by 2.6% over the last 24 hours, whereas gold initially spiked by as much as 5.5% before giving back some gains to be ~1.8% higher following the attack.

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Implications

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This is the most significant geopolitical escalation since Russia's invasion of Ukraine. Gold, already at US $5,382/oz, could surge further as safe-haven demand intensifies. Bitcoin tends to sell off initially alongside equities during sudden escalations, but the medium-term debasement narrative strengthens as military spending ramps up. Taking the recent conflict between Russia and Ukraine as an example, Bitcoin fell 3% on the day before rising nearly 15% the week following the invasion.

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Wall Street's most profitable firm faces reckoning

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Terraform Labs' bankruptcy administrator filed a lawsuit on 24 February accusing Jane Street and three individuals of using non-public information to front-run the May 2022 Terra Luna collapse. The complaint alleges that ten minutes after Terraform quietly withdrew US $150 million in UST from Curve's 3pool, a Jane Street-linked wallet withdrew US $85 million before any public announcement. The alleged information pipeline ran through a former Terraform intern who joined Jane Street in 2021. Jane Street has called the claims "desperate" and "baseless."

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Here's a full breakdown of the Jane Street saga:

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Implications

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The viral Crypto Twitter theory that Jane Street was systematically dumping Bitcoin at the 10 a.m. ET open remains unproven; analysts point to normal ETF authorised participant mechanics as the likelier explanation. Still, the timing is notable: since the lawsuit was filed, Bitcoin's persistent morning sell-offs paused and the price rallied over 6%, liquidating US $500 million in shorts. The lawsuit's real significance may be in establishing legal precedent for how insider trading laws apply to decentralised protocols, a question courts have barely begun to address.

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"Buy Bitcoin" Searches Hit Five-Year High

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Google searches for "How To Buy Bitcoin" hit their highest level since 2021 on 25 February, coinciding with Bitcoin's recovery from a nearly 50% drawdown from its October 2025 all-time high above US $126,000. Separately, U.S. searches for "Bitcoin to zero" also reached record highs earlier in February, reflecting deeply divided retail sentiment.

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Implications

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Search interest for "buy bitcoin" historically spikes in two conditions: late-stage euphoria and capitulation bottoms. This spike falls in the latter category, with the Fear & Greed Index recently hitting an all-time low of 5. Combined with record whale addresses and Bernstein maintaining its US $150,000 year-end target, the signal is directionally bullish. The contrarian caveat: Google Trends measures relative, not absolute search volume. With Bitcoin's mainstream awareness far higher than 2021, a peak score today does not necessarily mean more people are searching; it means the term spiked relative to a much larger baseline.

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Until next week,
James

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