In short
- Bitcoin has held steady after an initial sell-off over the weekend due to tensions in the Middle East, holding up better than US stock index futures.
- Funding rates in Bitcoin futures have turned sharply negative, indicating overcrowded short positions in the derivatives markets.
- Oil and gold have risen on fears of supply disruption and inflation risk, underscoring a broader expression of risk in global markets.
Bitcoin has so far absorbed the latest escalation in the Middle East, following a spike in volatility in US futures on Sunday, as traders continue to analyze the impact on global energy markets.
US-led strikes on Iranian targets have prompted retaliatory missile and drone attacks, raising fears of a wider regional conflict after reports that Ayatollah Ali Khamenei’s 36-year rule as Iran’s supreme leader had come to an end.
Iran has warned of further retaliation, while disruptions to shipping and aviation in the Gulf have heightened concerns that the conflict could extend beyond limited exchanges.
Bitcoin is down 0.4% on the day at $66,600, having regained lost ground over the weekend when the price fell to $63,000. According to CoinGecko data, the asset is down about 2.8% this week.
The decline was relatively smaller than the losses implied by stock index futures, which fell more than 1% on the Nasdaq, Dow and S&P 500. Losses on stock index futures indicate that investors are broadly reducing risk in response to macro and geopolitical developments ahead of the US opening.
“Bitcoin’s initial sell-off was almost textbook; markets hate uncertainty more than bad news, and just as the Iran conflict seemed under control, the reflexive bid quickly returned,” Ryan McMillin, Chief Investment Officer at Merkle Tree Capital, told me. Declutter.
The expert pointed to a Fear and Greed index of 11, while Bitcoin futures funding rates fluctuated to -6%, indicating that shorts are paying a significant premium to maintain a bearish bias in a situation not seen since Bitcoin traded at $16,000 in 2022.
“The market automatically pays you to be long; it’s time to go long,” McMillin said.
Echoing that sentiment, Pratik Kala, head of research at Apollo Crypto, shared Declutter Bitcoin’s price action suggested that much of the initial shock had already been reflected.
“Bitcoin would have sold out by now if it needed to. Events over the weekend were very positive. CME futures have also opened, and if Bitcoin were to dump or follow stocks, they would have done so by now,” Kala said.
Broader markets have focused on the potential for disruption around the Strait of Hormuz, the narrow shipping lane that carries about a fifth of global oil supply.
Oil prices have risen sharply as a result of the conflict with Iran, with Brent crude rising around 8-10% to $80 per barrel and US WTI up around 7-8%.
“If oil prices remain high, there is a risk of higher inflation, which is negative for risk assets – and Bitcoin,” Kala said. “However, I don’t expect this to be the base case.”
Kala cited large oil supplies from OPEC countries that could try to “close the gap” and President Donald Trump doing “things in his power” to keep prices low because “he knows that is what will turn American sentiment the most.”
Gold in the safe haven has meanwhile risen by more than 2% to $5,388 per troy ounce.
“The ongoing conflict in the Middle East will further fuel gold’s tailwinds, likely leading to a sudden price spike on rising safe-haven demand.” Han Tan, chief market analyst at Bybit Learn, said Declutter.
“Yet, seasoned market watchers will be well aware that geopolitical risk premiums often disappear quickly once market and economic risks have been digested and appear to be under control,” he added.
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