Bitcoin surged back above $70,000 on Monday for the first time since 25 March, lifted by reports that Iran is seeking a ceasefire in the ongoing war even as US President Donald Trump escalated threats against the country's civilian infrastructure.
The cryptocurrency rose more than 3.5%, touching $70,200 before paring some gains to trade just under $70,000 as of mid-morning in London.
Ether, the second-largest digital asset by market capitalisation, rose as much as 5.1%.
Roughly $273 million of bearish bets on cryptocurrencies were unwound in the 24 hours to Monday morning, according to data from Coinglass, the crypto market analytics platform.
Regional mediators have been pushing for a 45-day ceasefire as a last-ditch effort to end the conflict, Axios reported on Monday.
Trump on Sunday issued increasingly aggressive threats on social media, warning the US would bring "Hell" to Iran if it did not reopen the Strait of Hormuz, a critical trade waterway largely closed since the war began, and suggesting attacks on Iranian power plants could begin as soon as Tuesday.
Damien Loh, chief investment officer at Ericsenz Capital, said many short positions had been initiated over the weekend as Middle East tensions rose following Trump's comments, with Monday's public holidays across Europe and Asia adding to volatility amid thin liquidity conditions.
Bitcoin has traded roughly between $65,000 and $75,000 for several weeks and remains around 45% below its October peak above $126,000.
Flows into US-listed spot Bitcoin exchange-traded funds (ETFs) have held up, recording $22.3 million in net inflows last week.
Gracie Lin, chief executive of crypto exchange OKX SG, said price action remained orderly, suggesting the move was driven by incremental allocation rather than leverage.