Bitcoin's price slid on Thursday, erasing the gains it had built earlier in the week after oil prices jumped above $110.

The largest cryptocurrency was down nearly 4% over a 24-hour period in New York trading on Thursday, touching a low of $81,331 at one point.

The decline marked a sharp reversal from Wednesday, when the top cryptocurrency was closing in on $85,000 as investors piled back into tech stocks following Elon Musk's SpaceX earnings.

The renewed selling pressure came after conflict in the Middle East pushed oil prices higher, spurring inflation fears in the United States. A surging oil price can — at least in the short term — weigh on bitcoin and other "risk-on" assets because it raises the likelihood of the U.S. central bank raising interest rates. In practice, that makes energy headlines part of the interest-rate outlook crypto traders track, since the direction of rates shapes the liquidity available to risk assets.

Bitcoin has historically performed well in low interest rate environments because of increased liquidity, moving at times in tandem with tech stocks and the Nasdaq.

Stocks also slid on Thursday following news of more attacks by the Yemeni Houthis on Saudi Arabia, which stoked fears of oil supply disruptions and a wider Middle East conflict.

Bitcoin has typically faced downward pressure on news of war and has rallied on hopes of a ceasefire. When the U.S. and Israel first attacked Iran in February, the coin nosedived, and it remained shaky on war-related headlines through March and April. That history makes war and ceasefire headlines a recurring cue for bitcoin traders whenever geopolitical tensions flare.

Rising oil is also stoking what many politicians are calling an affordability crisis in the U.S. Americans will go to the polls on November 3, and surging inflation is one of the hottest topics of the campaign. The Federal Reserve has said that getting inflation down in the world's largest economy is its top priority. Against that backdrop, the variables for bitcoin traders to watch from here include the trajectory of oil prices, Middle East headlines, and future Fed decisions, all of which feed into the liquidity picture that has historically guided the asset.

Despite the recent dip, bitcoin just posted its best quarter in years, and analysts have said the coin is now in a bull market after rising above its 365-day moving average — a long-term trend indicator spanning a full year of price action.

Last month, bitcoin shrugged off the Federal Reserve raising interest rates as well as lawmakers blocking landmark crypto legislation, the Clarity Act.

This article first appeared on Bitcoin Magazine and is written by Mathew Di Salvo.