Pakistan’s military launched airstrikes on targets in Kabul overnight, sharply escalating tensions with neighboring Afghanistan and prompting Islamabad’s defense minister to describe the situation as an “open war.” Kabul authorities reported casualties and vowed retaliation, as cross-border artillery exchanges intensified along disputed frontier zones.
Global powers including Russia, Iran and the United Nations called for immediate restraint, warning that a prolonged confrontation between nuclear-armed Pakistan and Taliban-controlled Afghanistan could destabilize South Asia at a delicate economic moment.
For financial markets, the first reaction was familiar. Risk assets wobbled. Oil edged higher on regional uncertainty. And cryptocurrencies, often described as borderless and detached from geopolitics, slipped modestly into the red.
As of writing, Bitcoin traded near $67,600, down roughly 1% on the day. Ethereum hovered around $2,030, while XRP changed hands near $1.41. The broader crypto market capitalization stood around $2.3 trillion, reflecting a mild but noticeable shift toward caution.
The First Shock: Risk-Off
History suggests that when war headlines break, crypto behaves less like “digital gold” and more like a high-beta tech stock.
When Russia invaded Ukraine in February 2022, Bitcoin initially dropped sharply as investors sought safety in the U.S. dollar and gold. A similar pattern emerged during flare-ups in the Middle East in 2023 and 2024, when sudden escalations triggered 5% to 10% pullbacks across major tokens.
The Pakistan-Afghanistan confrontation could follow that script. An escalation would likely spark short-term selling pressure, particularly in altcoins, as global investors reduce exposure to risk-sensitive assets.
The Second Phase: Utility in Conflict
Yet war has also revealed another side of crypto.
During the Russia-Ukraine conflict, Ukraine raised more than $100 million in digital asset donations. Russians turned to stablecoins to bypass capital controls. In the Middle East, militant groups and humanitarian organizations alike used crypto rails to move funds when traditional banking channels were disrupted.
South Asia presents similar dynamics. Afghanistan has faced severe banking restrictions since the Taliban’s return to power. Aid agencies have experimented with digital wallets to distribute assistance. Militant organizations in the region have reportedly explored crypto for cross-border transfers.
If the conflict deepens, crypto could see a surge in localized usage even as prices wobble globally.
Bitcoin: Safe Haven or Speculative Asset?
For Bitcoin, the question is whether it trades as protection or speculation.
In prolonged crises tied to currency instability or sanctions, Bitcoin has sometimes rallied on a “digital gold” narrative. But in the immediate aftermath of military escalation, liquidity tends to dry up and volatility increases.
If markets begin to fear broader regional destabilization or global macro spillover, Bitcoin could test lower support levels before any safe-haven bid materializes.
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