BTC Slips 1.7% to $63.6K as Iran Airstrike Pause Fails to Calm Rate-Hike Fears

For investors tracking the intersection of macroeconomics and digital assets, Friday’s price action underscores crypto’s growing sensitivity to rate expectations and geopolitical shocks. Despite an initial boost after the Fed held rates and airstrikes paused, the morning reversal signals that inflation fears tied to energy supply disruptions remain the dominant narrative.

Bitcoin and ethereum prices opened higher on Friday, July 31, 2026, only to reverse sharply during the morning trading session, underscoring the fragile sentiment gripping crypto markets. Bitcoin (BTC) began the day at $64,724.03, a 1.3% increase over Thursday’s open, while ethereum (ETH) started at $1,917.16, up 0.4%. By 8:52 a.m. ET, however, BTC had slid to $63,652.09 and ETH to $1,877.52, erasing overnight gains and leaving traders grappling with a 1.7% intraday decline for bitcoin and a 2.1% drop for ethereum.

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Bitcoin (BTC) began the day at $64,724.03, a 1.3% increase over Thursday’s open, while ethereum (ETH) started at $1,917.16, up 0.4%.

The reversal came despite what initially appeared to be supportive news. Overnight, U.S. airstrikes in Iran were paused—a development that briefly buoyed risk assets, including cryptocurrencies. Earlier in the week, on Wednesday, the Federal Reserve opted to leave interest rates unchanged, a decision that had contributed to a gradual build in momentum for bitcoin prices heading into Friday. Yet by morning, the relief proved temporary. The persistence of geopolitical tensions, most notably the continued closure of the Strait of Hormuz, kept energy costs elevated and inflation fears alive. As one of the world’s most critical oil transit chokepoints, the Strait’s shutdown has rippled through commodity markets and reignited expectations that the Fed may be forced to hike rates later in the year to combat price pressures.

The interplay of these factors is reshaping how cryptocurrencies behave as an asset class. Bitcoin and ethereum, once touted as uncorrelated hedges, have increasingly tracked risk-on equities and technology stocks. The macro backdrop—characterized by a restrictive monetary policy environment, elevated energy prices, and geopolitical uncertainty—has made digital assets particularly vulnerable to sudden reversals. The morning’s price action illustrates how even a temporary lull in conflict fails to provide lasting support when structural concerns over supply-side inflation persist.

From a pricing perspective, the declines leave both assets dramatically below their all-time highs. Bitcoin’s record peak of $126,198.07, set on October 6, 2025, now sits 49.6% above current levels, while ethereum’s all-time high of $4,953.73, reached on August 24, 2025, is 62.1% away. The magnitude of these gaps highlights the deep retracement the crypto market has suffered since its 2025 highs, and the difficulty of staging a sustainable recovery in the face of tough macro headwinds.

Analysts have not adjusted their forward expectations in a way that would comfort the market. The pause in airstrikes and the Fed’s status-quo decision have not altered the baseline assumption that additional monetary tightening remains on the table. As long as the Strait of Hormuz remains closed—and with it the upward pressure on energy input costs—market participants price in at least one more rate hike this year. Higher rates tend to compress the risk premiums available in speculative assets like crypto, reducing the incentive to hold them relative to yield-bearing instruments.