When the Asia-Pacific stock markets hit the circuit breaker, why does Bitcoin stand out as the best?

Author: Jae, PANews

On March 4th, as the Middle East situation suddenly worsened, the global financial markets instantly entered a “wartime state.” For investors worldwide, this was a trading day worth recording in history.
Disruptions in shipping through the Strait of Hormuz caused international oil prices to surge sharply, panic quickly swept through traditional capital markets, and Asia-Pacific stock markets experienced an epic sell-off.
KOSPI in South Korea plummeted 12% in a single day, the largest decline ever; the Nikkei 225 dropped 3.7%, marking its worst performance in five months; local Middle Eastern stock markets temporarily plunged nearly 5%; major European and American indices closed lower.
However, an unusual phenomenon quietly emerged amid this sell-off.
The crypto market, often regarded as “high risk, high volatility,” which typically crashes first during any geopolitical crisis, surprisingly held steady this time.
Bitcoin quickly rebounded after a brief panic sell-off, once again surpassing $74,000, hitting a two-week high. On the same day, Seoul investors watched KOSPI break the circuit breaker.
This is no longer just a simple binary of “hedge” versus “risk,” but a profound reassessment of asset nature, pricing logic, and market structure.
Asia-Pacific markets became the hardest hit, with KOSPI once dropping 12%.
After the outbreak of conflict, global stock markets entered a “worse mode.” Due to their high dependence on external energy sources, Asia-Pacific markets suffered the most.
South Korea’s stock market was hit hardest.
The Korea Composite Stock Price Index (KOSPI) closed down over 12%, marking its largest single-day decline ever. The day before (March 3rd), it had already fallen 7%. Over two trading days, the total decline approached 20%, with a loss of about $430 billion in market value— the most severe two-day drop since the 2008 global financial crisis.
The KOSDAQ, Korea’s tech-focused index, fared even worse, plunging 14% and triggering multiple circuit breakers during trading.
Why South Korea?
South Korea is the eighth-largest oil consumer globally, importing about 70% of its oil from the Middle East, with net oil imports accounting for 2.7% of GDP. Its economy is manufacturing-driven and highly sensitive to energy prices.
The blockade of the Strait of Hormuz caused oil prices to spike, meaning higher costs for companies, declining profit expectations, and increased inflationary pressures. For this export-oriented economy, the missiles of the Middle East war are not distant news but directly reflected in financial reports.
Even more critical is the market structure. Foreign investors hold over 30% of Korean stocks, and retail margin trading accounts for nearly 80%. When panic hits, foreign capital withdraws, leverage is liquidated, and stop-loss orders trigger simultaneously, creating a stampede-like sell-off.
Japan follows closely behind.
The Nikkei 225 index fell 3.7%, its largest single-day drop in nearly five months; the TOPIX index declined even more sharply, closing down 4%.
Japan is also a major energy importer. If Trump’s statement about possibly taking larger military action against Iran causes Tokyo traders to panic, the impact could be swift.
The Middle East itself is in the eye of the storm.
UAE markets reopened after two days of closure, with Dubai’s main stock index dropping sharply by 4.7% in early trading, marking a rare decline in recent years. Saudi Arabia’s benchmark index also fell nearly 5% during the initial chaos. Kuwait’s stock exchange suspended trading altogether to avoid a collapse.
For Gulf countries, war means uncertainty in oil revenues, stagnation in tourism and aviation sectors, and accelerated capital outflows.
The ripple effects of the Middle East conflict quickly spread to global financial markets, with European and American stocks also weakening. Although declines eased somewhat, major indices still closed lower.
Global stocks kept falling, while the crypto market rebounded “ahead of the curve.”
Amid the widespread sell-off in traditional markets, the crypto market’s performance surprised many.
Bitcoin quickly stabilized and rebounded after the initial panic sell-off, once again surpassing $74,000 on March 5th, reaching a two-week high.
This divergence is no coincidence. It results from multiple factors including pricing efficiency, valuation dislocation, inflation risks, anchoring mechanisms, and participant structures.
When war erupts over the weekend, the crypto market is the only tradable market.
No market closes, no circuit breakers, no delays. From the first explosion in Tehran, global investors could express their judgments in the crypto space.
This means that by the time Asia-Pacific markets open on Monday morning, the crypto market has already gone through several rounds of price discovery, largely digesting and pricing in most of the risks. The “initial dip followed by a rally” pattern of Bitcoin reflects this pricing efficiency.
At certain moments, the most sensitive crypto markets may serve as leading indicators for all assets.
Furthermore, before this “black swan” event, stock markets and crypto markets were in different valuation cycles.
Major global stock markets had been rising steadily early this year, with the Nikkei 225 hitting new highs, KOSPI near five-year highs, and the U.S. major indices oscillating near all-time highs. These markets had accumulated significant profit-taking, creating valuation bubbles.
When a “black swan” appears, profit-taking consolidates, stop-loss orders surge, and a sharp decline ensues.
Meanwhile, since October 2025, the crypto market has experienced multiple deep corrections. Valuations and leverage levels of mainstream assets have returned to reasonable ranges, profit-taking has been completed, and risks have been preemptively released.
When panic strikes, a market with high leverage and bubbles reacts differently from an undervalued market drained of liquidity.
The macro risk variable brought by the Middle East war is inflation.
Rising energy prices will push inflationary stickiness higher, forcing global central banks to delay rate-cutting cycles or even maintain high interest rates. For stocks, this is a double whammy of “valuation + profit” compression. Higher rates suppress valuations, and increased costs squeeze profits.
For Bitcoin, the logic is quite the opposite. Its fixed supply of 21 million coins makes it a “digital gold” in environments of fiat currency over-issuance and high inflation.
Against the backdrop of escalating geopolitical conflicts causing fiat currency volatility, more investors are using Bitcoin as a hedge against inflation and currency devaluation.
Meanwhile, local capital in the Middle East faces a triple dilemma: currency depreciation, stock market crashes, and intensified geopolitical risks. They seek borderless, unregulated safe-haven assets, and cryptocurrencies have become a major destination. This influx of capital also offsets some of the safe-haven selling pressure.
Stock market pricing anchors are tied to the real economy and corporate profits, while crypto pricing is anchored to global liquidity and decentralization.
For export-dependent, energy-importing economies like Japan and South Korea, the Middle East conflict directly impacts their fundamentals. Rising oil prices increase production costs, and with weak global demand, companies struggle to pass on costs, significantly compressing profit margins.
In contrast, the devaluation of fiat currencies and cross-border capital controls triggered by the Middle East conflict highlight the decentralized nature of crypto assets, making them an attractive hedge against geopolitical risks.
This explains the starkly different reactions of stocks and crypto markets to the same geopolitical risks.
BlackRock’s research has shown that Bitcoin outperforms gold and stocks during geopolitical shocks, and this conclusion remains valid today.
Market participant structure also determines volatility.
South Korea’s sharp decline exposed the fragility of its market structure: high foreign ownership, crowded leverage trading, and dominance of algorithmic trading.
When panic hits, these factors resonate, triggering stampedes and circuit breakers.
In contrast, the participant structure of the crypto market has undergone fundamental changes. Data from Glassnode shows that the net positions of long-term Bitcoin holders are stabilizing, indicating weakening selling pressure.
The U.S. spot Bitcoin ETF has also brought in stable institutional capital, shifting some pricing power into the hands of institutions, which generally have better risk management and longer-term perspectives, providing underlying liquidity support.
More importantly, before this “black swan,” the crypto market had completed multiple deleveraging cycles. Derivatives markets did not experience large-scale liquidations, further reducing volatility.
War is a tragedy for humanity and a test of market resilience.
Yesterday’s global sell-off has taught all investors a lesson.
“High risk” isn’t necessarily truly high risk. When the crypto market remains steady amid volatility, traditional “relatively stable” stocks are experiencing crashes and circuit breakers.
Is this a temporary dislocation, or a sign of deeper logical shifts and asset re-labeling? Time will tell.
But in an era where geopolitical risks are becoming normalized, asset pricing anchors are shifting. Assets tied to a single economy are becoming more fragile, while those anchored to global liquidity are becoming more resilient.
The divergence between stocks and crypto during the US-Iran conflict once again proves that crypto assets are gradually becoming an important alternative medium in the global geopolitical game.
For many countries, the Middle East war is an unavoidable economic shock. For the crypto market, it is also a confirmation of valuation logic.
When the storm hits, what matters is not where you stand, but what your anchor is attached to.