Dollar surge impacts cryptocurrency markets following intensification of Iran conflict.

Risk assets experienced declines on Tuesday as the U.S. dollar rose to a near two-month peak following renewed military tensions in Iran, exerting pressure on the crypto market.

Dollar rises in risk-averse climate (Dmytro Glazunov/Unsplash/Modified by CoinDesk)

Key points:

• The DXY increased by 0.5% to its highest value since January 19, following Israel’s renewed strikes on Tehran and Beirut, alongside Iranian drone attacks on the U.S. embassy in Riyadh, leading to widespread declines in cryptocurrencies, stocks, and precious metals.
• Bitcoin surged to $70,000 on Monday in tandem with gold before dropping back to $66,500, maintaining its position within a range it has occupied since early February, while altcoins like ADA, ZEC, and DASH fell by over 4% since midnight UTC.
• CoinDesk’s Memecoin (CDMEME) and DeFi Select (DFX) indices recorded slight increases, with NEAR rising by 13.3% from oversold levels, while DeFi tokens JUP and MORPHO saw weekly increases of 23% and 20%, respectively.

The cryptocurrency market, U.S. stocks, and precious metals all declined on Tuesday as the dollar index (DXY) rose by 0.5% since midnight UTC, reaching its highest point since January 19.

This risk-averse atmosphere follows heightened tensions in Iran, where Israel has conducted new strikes on Tehran and Beirut, and the U.S. embassy in Riyadh was targeted by two Iranian drones.

Gold reached a one-month peak of $5,410 on Monday but subsequently fell to $5,260 on Tuesday as investors opted for the dollar as a safer alternative.

Bitcoin BTC$67,035.11 has shown a strong correlation with gold this week, rising on Monday to $70,000 before retreating to $66,500, firmly situated in the middle of a trading range established since early February.

The altcoin sector suffered greater losses than bitcoin, with ADA, ZEC, and DASH declining by over 4% since midnight UTC.

Derivatives positioning

• Market conditions have shifted into a consolidation phase, with BTC futures open interest stabilizing at $15.3 billion as the post-leverage cleanup reaches a state of balance. Retail sentiment remains tentatively optimistic, with funding rates varying from 0% to 10%, while institutional confidence has slightly waned, indicated by the 3-month annualized basis falling just below 3%. This suggests a solid market floor but a temporary halt in upward momentum.
• The options market has transitioned from “panic-hedging” to sustained optimism, with 24-hour call volume reflecting a 63/37 split. The 1-week 25-delta skew has eased to 14% (down from 27%), indicating a significant decrease in the cost of downside protection. Importantly, the implied volatility (IV) term structure has entered contango, as near-term premiums drop below the stable 49%–50% seen in longer-dated contracts, suggesting that immediate concerns have been supplanted by mid-term growth expectations.
• Coinglass data shows $392 million in liquidations within 24 hours, evenly split between longs and shorts. BTC ($163 million), ETH ($96 million), and Others ($20 million) were the top assets in terms of nominal liquidations. The Binance liquidation heatmap highlights $69,800 as a key liquidation level to observe in the event of a price increase.

Token talk

• CoinDesk’s Memecoin (CDMEME) and DeFi Select (DFX) indices have emerged as the top-performing benchmarks over the last 24 hours, gaining 0.95% and 0.71%, respectively.
• AI token NEAR rebounded from oversold conditions with a 13.3% increase on Tuesday, indicating that certain segments of the altcoin market are poised for upward movement.
• Overall, however, the altcoin market is still in a consolidation phase as part of a downtrend that began in October. In the past week, assets such as PEPE, ATOM, SHIB, and BCH have all recorded double-digit losses, even as bitcoin remains within its trading range.
• DeFi tokens JUP and MORPHO defied the consolidation trend, increasing by 23% and 20%, respectively, over the past week, continuing their upward trajectory on Tuesday.