U.S.-Iran Tension, Government Shutdown, Winter Crisis: Is Bitcoin Heading for a Bloodbath?

Bitcoin fell sharply on Wednesday, falling more than 6% in 24 hours and briefly entering the $83,000 low. The decline quickly unfolds late in the session, surpassing intraday support levels with little immediate buying response.
The move comes at a time when three macro risks are converging simultaneously: escalating tensions between the United States and Iran, growing expectations of a U.S. government shutdown, and a severe winter crisis that is straining infrastructure across North America.
Geopolitical risks have resurfaced after Washington issued new warnings against Tehran, while Iran signaled its readiness to respond forcefully to any military escalation.
Maritime movements in the Middle East and the new sanctioned rhetoric have raised concerns about miscalculation, especially as tension continues in diplomatic channels.
Markets typically treat the early stages of geopolitical escalation as a signal to avoid risks rather than a hedging scenario.
For Bitcoin, this often translates into reducing risk in the short term, especially when the combined positions are high and liquidity is weak.
Meanwhile, investors are increasingly pricing in the US government shutdown as funding negotiations stall ahead of an important deadline.
Without a last-minute agreement, several federal agencies could face operational disruptions, delaying payments and reducing funding visibility in the near term.
Historically, the price of Bitcoin has dropped significantly during the last three closes, losing up to 16%.
In fact, traders reduce exposure first and then reevaluate later, especially in markets that show signs of weak demand.
A severe winter storm continues to disrupt large parts of the United States and Canada, causing power outages, transportation delays, and infrastructure strains.
While weather events rarely act as major catalysts for Bitcoin, they contribute to avoiding broader risks when they build up on geopolitical and financial pressures.
In this case, the storm acts more as a accumulation factor, boosting the market's defensive mood rather than directly impacting the Bitcoin network or mining activity.
Price action refers to forced selling
Bitcoin's daily chart shows long bearish drifts followed by a sharp collapse at the end of the session. The absence of a strong rebound suggests that the movement was driven less by discretionary sellers and more by forced adjustments to positions, such as liquidators and stop-loss triggers.
This type of price behavior usually appears when liquidity is insufficient to absorb sudden selling pressure, a condition that is closely related to weak spot demand.
One of the most significant structural shifts is seen in the Bitcoin spot fund flows in the United States. Since the beginning of the year, ETFs have net sales of around 4,600 BTC, compared to net inflows of around 40,000 BTC during the same period last year.
This change is important because ETFs have been the most consistent source of spot demand in this cycle.
When this supply weakens, the highs struggle to maintain momentum and the dips become more violent, as fewer buyers step in to absorb the supply.
Shrinking retail demand undermines market stability
Transaction tracking data on the $0-$10,000 chain shows that retail demand has contracted sharply over the past month. This indicates not only a slower accumulation, but a decline in smallholder participation.
Markets can withstand the temporary absence of a fragmentation, but a prolonged deflation removes an important stabilizing force.
With ETF outflows, the market becomes more dependent on short-term traders and leverage, both of which increase demand volatility.
Despite the crash, Bitcoin's supply-to-loss scale remains relatively low compared to historical benchmarks. This means that the majority of holders are still on unrealized gains, a condition that often precedes further declines rather than determines the bottom.
When the price falls to areas where more supply turns into a loss, selling pressure can accelerate as sentiment shifts and risk tolerance tightens.
Do these events cause a sell-off — or reveal weakness?
The data points to the last possibility. Tensions between the U.S. and Iran and lockdown fears were likely catalysts that accelerated risk reduction. However, ETF inflows and the collapse in retail demand point to a market that was already vulnerable.
Rather than creating new vulnerabilities, the major shocks seem to have exposed a structural fragility that was building up beneath the surface.
What the charts mean for next week
If demand conditions remain unchanged, Bitcoin may continue to face volatile price action with weak rebounds. Any rise in relief will need to be supported by ETF flows or stabilization of retail demand to sustain the rally.
On the downside, a crucial breakout below the recent low could trigger another wave of forced selling.
At the moment, Bitcoin's trajectory seems to be less dependent on addresses and more on whether the underlying demand will return before volatility forces another reset.