Why did Bitcoin thrive while Asian stock markets fell below the circuit breaker threshold?

Author: Jae, PANews

On March 4, as the situation in the Middle East deteriorated sharply, global financial markets instantly entered a "wartime state." For global investors, this was a trading day that will go down in history.

The disruption of shipping through the Strait of Hormuz, a global energy chokepoint, triggered a sharp rise in international oil prices, and panic quickly swept through traditional capital markets, with Asia-Pacific stock markets experiencing an epic sell-off.

South Korea's KOSPI plunged 12% in a single day, marking its biggest drop in history; the Nikkei 225 plummeted 3.7%, its worst performance in five months; Middle Eastern stock markets plunged nearly 5% at one point during a correction; and major European and American stock indices all closed lower.

However, an unusual phenomenon quietly emerged during this sell-off.

The crypto market, which is usually considered a "high-risk, high-volatility" asset class that would be the first to collapse in any geopolitical crisis, has actually stabilized this time.

Bitcoin rebounded quickly after a brief panic sell-off, briefly breaking through $74,000 to reach a two-week high. On the same day, Seoul investors watched helplessly as the KOSPI fell below its circuit breaker threshold.

This is no longer a simple dichotomy between "hedging" and "risk," but a profound reassessment of the nature of assets, pricing logic, and market structure.

Asian stock markets were hit hardest, with South Korea's KOSPI once plunging 12%.

After the outbreak of war, global stock markets entered a "misery competition" mode. The Asia-Pacific market, due to its heavy reliance on external energy sources, became one of the hardest hit.

The South Korean stock market suffered the most severe decline.

South Korea's KOSPI index plunged more than 12% at the close, marking its biggest single-day drop ever. The previous day (March 3), it had already fallen 7%. In two trading days, the cumulative decline was nearly 20%, wiping out approximately $430 billion in market capitalization. This was the worst two-day losing streak since the 2008 global financial crisis.

The South Korean KOSDAQ index fared even worse, plunging 14% and triggering circuit breakers multiple times during the session.

Why South Korea?

South Korea is the world's eighth-largest crude oil consumer, with approximately 70% of its oil imports coming from the Middle East. Net oil imports account for 2.7% of its GDP. Its economy is primarily manufacturing-based and extremely sensitive to energy prices.

The closure of the Strait of Hormuz has led to a surge in oil prices, meaning soaring business costs, declining profit expectations, and increased inflationary pressures. For this export-oriented economy, missiles from the Middle East wars are not distant news, but rather a direct impact on financial statements.

Even more devastating was the market structure. Foreign investors held over 30% of the shares in the South Korean stock market, and retail investors accounted for nearly 80% of margin trading. When panic struck, foreign capital withdrew, leveraged positions collapsed, and quantitative stop-loss orders were triggered simultaneously, leading to a stampede-like sell-off.

Japan followed closely behind.

The Nikkei 225 index closed down 3.7%, marking its biggest single-day drop in nearly five months; the Topix index fared even worse, closing down 4%.

Japan is also a major energy importer. Trump's remarks about "possibly taking larger-scale military action against Iran" are enough to send shivers down the spines of traders in Tokyo.

Meanwhile, the Middle East itself is in the eye of the storm.

The UAE stock market reopened after a two-day closure, with Dubai's main financial market index plunging as much as 4.7% in early trading, marking a rare drop in recent years. Saudi Arabia's benchmark stock index suffered a nearly 5% plunge in the early stages of the conflict. The Kuwait Stock Exchange simply suspended trading to avoid a catastrophic sell-off.

For the Gulf states, war means uncertainty about oil revenues, stagnation in the tourism and aviation industries, and an acceleration of capital flight.

The aftershocks of the Middle East conflict quickly spread to global financial markets, with European and American stock markets collectively weakening. Although the declines have eased somewhat, major stock indices still closed lower.

Global stock markets continue their downward spiral, while the cryptocurrency market is leading the rebound.

While global stock markets were in turmoil, the performance of the crypto market surprised many.

After the initial panic selling, Bitcoin quickly stabilized and rebounded, briefly breaking through $74,000 on March 5, reaching a two-week high.

This divergence is not accidental. It is the result of multiple factors, including pricing efficiency, valuation misalignment, inflation risk, anchoring mechanisms, and participant structure.

When war breaks out over the weekend, the crypto market is the only market where trading is possible.

There were no market closures, no circuit breakers, and no delays. From the first explosion in Tehran, global investors were able to express their opinions in the crypto market.

This means that by the time Asian stock markets opened on Monday morning, the crypto market had already completed several rounds of price discovery, absorbing and pricing in most of the risks in advance. The "downward then upward" price movement of Bitcoin is a reflection of this pricing efficiency.

At certain moments, the most sensitive crypto markets may be becoming a leading indicator for all assets.

Furthermore, prior to this "black swan" event, the stock market and the crypto market were in different valuation cycles.

Major global stock markets continued their upward trend at the beginning of the year, with the Nikkei 225 index repeatedly hitting new historical highs, the South Korean KOSPI at a near five-year high, and the three major US stock indices all fluctuating near their historical peaks. These major global stock markets have accumulated substantial profits, and valuation bubbles are forming.

Once a "black swan" event occurs, profit-taking occurs in a concentrated manner, coupled with a surge of stop-loss orders, resulting in a sharp drop in the market.

The crypto market has experienced several deep corrections since October 2025. The valuations and leverage levels of mainstream assets have fallen back to reasonable ranges, profits have been fully realized, and risks have been released in advance.

When panic strikes, a market with a bubble and high leverage will react differently than a market that has been squeezed dry and is undervalued.

The macroeconomic risk variable brought about by the Middle East war is inflation.

Soaring energy prices will increase inflation stickiness, forcing central banks worldwide to postpone interest rate cuts or even maintain high rates. For stocks, this is a double whammy of valuation and earnings pressures – interest rates suppress valuations, while costs squeeze profits.

For Bitcoin, the logic of inflation is exactly the opposite. Its fixed total supply of 21 million coins makes it regarded as "digital gold" in an environment of excessive fiat currency issuance and high inflation.

Against the backdrop of escalating geopolitical conflicts and volatility in fiat currency credit, an increasing number of investors are using it as a tool to hedge against inflation and fiat currency devaluation.

Meanwhile, domestic capital in the Middle East faces a triple dilemma: currency devaluation, stock market crashes, and escalating geopolitical risks. They need to find borderless, unregulated safe-haven assets, and cryptocurrencies have become one of the main destinations. This influx of funds has also offset some of the selling pressure from safe-haven buyers.

Stock market pricing is anchored to the real economy and corporate profits, while cryptocurrency market pricing is anchored to global liquidity and decentralized attributes.

For export-oriented economies like Japan and South Korea, which are heavily reliant on energy imports, the Middle East wars have directly impacted their economic fundamentals. Soaring oil prices have driven up production costs, and against the backdrop of weak global demand, companies are struggling to pass on these cost pressures, significantly squeezing profit margins.

Conversely, the devaluation of fiat currencies and cross-border capital controls caused by the Middle East conflict have highlighted the decentralized nature of crypto assets, making them an option for global capital to hedge against geopolitical risks.

This is the fundamental reason why the stock market and the crypto market react very differently to the same geopolitical risks.

BlackRock research has previously indicated that Bitcoin outperforms gold and stocks in the face of geopolitical shocks. This conclusion remains valid to date.

The structure of market participants determines volatility.

The sharp decline in the South Korean stock market exposed the fragility of its market structure: high foreign investment ratio, crowded leveraged trading, and dominance of algorithmic trading.

When panic sets in, these three factors resonate, directly triggering stampedes and circuit breakers.

The participant structure in the crypto market has undergone a fundamental change. Glassnode data shows that the net position changes of long-term Bitcoin holders are moderate, indicating that the intensity of the sell-off is weakening.

US spot Bitcoin ETFs have also brought in stable institutional funds, and some pricing power has been transferred to institutional investors. These institutions typically have more professional risk control capabilities and a longer-term investment perspective, forming underlying liquidity support.

More importantly, the crypto market had already completed multiple rounds of deleveraging before this "black swan" event, and the derivatives market did not experience a large-scale chain of liquidations, further reducing volatility.

War is a human tragedy, but it is also a touchstone for market resilience.

Yesterday's global sell-off taught all investors a lesson.

What is considered "high-risk" is not necessarily truly high-risk. While the crypto market stabilized amidst volatility, the traditionally "relatively stable" stock market was experiencing a crash and circuit breakers.

Whether this is a temporary misalignment or a shift in deeper logic and a rewriting of asset labels remains to be seen.

However, in an era where geopolitical risks are becoming the norm, the pricing anchor for assets is shifting. Assets tied to a single economy will become increasingly vulnerable, while assets anchored to global liquidity will become increasingly resilient.

The divergence between the stock market and the crypto market during the recent US-Iran war once again proves that crypto assets are gradually becoming an indispensable alternative medium in global geopolitical games.

For many countries, the Middle East wars are an unavoidable economic shock. For the crypto market, however, the same wars represent a confirmation of its value logic.

When a storm comes, what matters is not where you stand, but what you are anchored to.