The sentiment in the crypto markets is decidedly very low at the moment.
Among the various causes underlying this issue, are there also geopolitical factors?
Although there may not be direct links between geopolitical tensions and the sentiment of the crypto market, it seems that there is at least a direct connection, which is quite evident.
Summary
The VIX
The VIX, or the CBOE Volatility Index, is known as the “fear index”.
This is an index calculated based on the price of options on the S&P 500, which measures its expected annualized volatility.
In simple terms, it is a gauge that measures how turbulent investors expect the U.S. stock market to be in the near future.
By the end of 2025, the VIX index value was below 14 points, which is considered a medium-low level.
By early 2026, however, it had already climbed back to 15, and before the end of January, it had risen again to around 20, which is also approximately the current level.
Although historically it has reached much higher peaks, such as in April of last year when it marked a peak above 50 points following Trump’s announcement of so-called “reciprocal” tariffs, the current level cannot be considered low at all. Furthermore, since September 2024, the annual average has been on the rise, as it has increased from 15 to over 18 points.
Fear
All this can be interpreted as a sign that there is some widespread fear in the American stock markets, although it is not significant, at least for now.
This fear is certainly partly due to concerns about the performance of the Trump administration, but it is also undoubtedly influenced by geopolitical tensions, which closely affect the USA, and the disruptive innovations brought about by AI.
This fear inevitably spills over into the crypto markets as well, in addition to traditional ones, and even amplifies.
Since Trump won the elections in November 2024, for example, the trend of Bitcoin’s price has sometimes tended to be inversely correlated with the VIX.
Specifically, starting from October 10th, the VIX left the 15 mark to climb first to 20 in November, then a second time at the end of January, and a third time in recent days. In all three instances, the price of Bitcoin fell.
Therefore, there appears to be a direct, albeit inverse, correlation at least between the price of Bitcoin and the fear index, which ultimately impacts the rest of the crypto market.
The Crypto Market
The price trend of Bitcoin has been very similar to that of Ethereum as well as Total3 at least since August 2025.
Total3 is the overall market capitalization of altcoins excluding Bitcoin, Ethereum, and stablecoins, thus, along with BTCUSD and ETHUSD, it allows for measuring the performance of the crypto market as a whole.
The fact that these three metrics have shown an extremely similar trend since August 2025 speaks volumes about how much Bitcoin is impacting the entire crypto market.
In other words, the price trend of BTC in dollars is inversely correlated with the fear index, and that of altcoins, including ETH, is in turn correlated with that of BTC.
At this moment, the fear that the USA might trigger a war against Iran is also keeping the VIX elevated, so much so that it can be said that geopolitical tensions are having an indirect effect on the crypto market.
The Liquidity Problem
To be honest, there is another issue underlying this problem.
This is an issue directly related to the liquidity available in the markets.
It must be noted that the trend of Bitcoin’s price in dollars is closely correlated with the fluctuations in dollar liquidity present in the financial markets.
However, it’s not just about the absolute amount of liquidity that exists, but more importantly, how much of it is specifically present in the financial markets, and how it circulates.
Out of approximately 22 trillion dollars existing in the form of M2 money supply, only a minority portion is present in financial markets, as the majority is used in consumer markets or B2B markets.
The fact is that the US government has been holding nearly a trillion dollars in its bank accounts for weeks, effectively withdrawing them from the markets.
The primary one to bear the brunt is Bitcoin, as it is the only asset whose market value primarily depends on liquidity. Other assets, such as equities, depend only partially on liquidity, and therefore suffer less.
For example, gold and silver are near their highs, precisely because gold is the ultimate safe haven asset during times of fear.
Therefore, it is not only geopolitical tensions causing issues for the crypto market, but also the excessive liquidity drain from the markets by the U.S. government.
