Cryptocurrency markets decline as oil prices rise and investors increase short positions: Cryptocurrency Update Today

Bitcoin and ether experienced significant declines alongside global risk assets as heightened tensions in Iran led to increased oil prices, with derivatives data indicating that traders are preparing for additional downturns.

Traders pile into bearish bets (geralt/Pixabay

What to know:

• Cryptocurrency values declined as renewed geopolitical conflicts caused oil prices to rise by 10%, adversely affecting equities, bolstering the dollar, and leading to a broader risk-off sentiment.
• Funding rates turned significantly negative while open interest increased, suggesting traders are taking short positions on BTC and ETH; liquidations approached $400 million.
• Despite the decrease, implied volatility remains steady, and options markets indicate continued demand for downside protection instead of panic selling.

Bitcoin BTC$66,455.97 retraced a significant part of its recent gains on Thursday, now trading at $66,700 after a 2.4% decline since midnight UTC.

Ether (ETH) fared even worse, dropping by 4.4% as the overall cryptocurrency market grapples with ongoing risk-off sentiment.

This latest decline was triggered by U.S. President Donald Trump, who remarked on Wednesday night that the conflict in Iran would persist with extensive military action.

“In the next two to three weeks, we’re going to bring them back to the stone ages where they belong,” he stated.

These remarks caused an immediate surge in oil prices, with Brent crude climbing approximately 10% to $108 per barrel as U.S. stock indices diverged.

Nasdaq 100 and S&P 500 futures fell by 1.5% and 1.1% respectively, while the U.S. dollar rose by 0.5% to over 100 points.

Derivatives positioning

• The price of BTC has declined more than 2% since midnight UTC, accompanied by a slight increase in open interest in key USD- and USDT-denominated futures. Additionally, perpetual funding rates have reached their most negative levels since March 12. This combination indicates that traders are bearish and shorting the declining market.
• For ether, funding rates are at their most negative since October of last year, reflecting a strong inclination towards bearish positions. Despite this, bearish sentiment in Solana (SOL) is surprisingly more restrained, even after the overnight hack.
• Privacy-oriented Zcash (ZEC) and ADA$0.2375 have witnessed a significant decrease in open interest (OI) within 24 hours, indicating capital outflows.
• Nearly $400 million in futures positions have been liquidated as a result of margin shortfalls, marking a 17% increase in losses compared to the previous day.
• Despite the renewed risk-off atmosphere, bitcoin and ether’s 30-day implied volatility indices have remained stable within recent ranges, suggesting orderly selling in the spot market rather than panic.
• Panic is unlikely since traders are already positioned for a market downturn. They have been consistently pursuing bitcoin and ether put options (downside hedges) since the beginning of the year. At the time of writing, bitcoin and ether puts were priced higher than calls across all expiration dates on Deribit.
• Block flows showed demand for ether straddles, a volatility strategy, and put spreads, along with bitcoin call spreads.

Token talk

• The poorest performing benchmark on Thursday was CoinDesk’s DeFi Select Index (DFX), which dropped 5.9% since midnight UTC, closely followed by the CoinDesk Computing Select Index (CPUS) that fell by 5%.
• Ethena (ENA) was the leader in the downward trend, decreasing by more than 10% on Thursday, alongside significant declines among DeFi tokens UNI, LDO, SKY, and AAVE – all losing between 4.2% and 6.5% during Asian and European trading hours on Thursday.
• Algorand (ALGO) defied the bearish trend, increasing by approximately 0.8% on Thursday as it continues its positive performance, having surged by 22% in the past week.
• CoinMarketCap’s “altcoin season” index has declined from 50/100 to 42/100 since March 30, indicating relative weakness across the sector.