The Bitcoin price has plummeted by 3.5% in the past 24 hours following President Donald Trump's announcement to resume US attacks on Iran.
Trump threatened to 'hit them hard tonight', adding that he didn't want to deal with Iran anymore and considering it over.
This escalation of tensions has sent oil prices soaring, with West Texas Intermediate (WTI) jumping in response to the President's remarks.
The increase in oil prices would lead to persistent inflation in the US, giving the Federal Reserve a stronger basis to raise interest rates, potentially by 50 basis points if necessary.
Analysts now give a 71% chance of a 25 basis point rate increase in September and 33% expect another rate hike in January.
The crypto market's fragility is highlighted by the decline, which comes as geopolitical tensions are at an all-time high and investor interest has shifted to other areas like artificial intelligence and hot IPOs such as SpaceX.