Crypto steadies as Iran-U.S. pause sends oil tumbling, lifts risk assets

Brent crude plunged 7% after the U.S. and Iran paused Strait of Hormuz strikes, lifting equities and DeFi tokens while bitcoin held near $65,000 ahead of a pivotal Fed decision Wednesday.

Bitcoin price (CoinDesk Data)
Bitcoin price (CoinDesk Data)
  • The U.S. and Iran paused strikes over the Strait of Hormuz, sending Brent crude tumbling more than 7% to around $87, easing the inflation fears that have weighed on risk assets for weeks.
  • The Fed meets this week on whether to raise rates for the first time in three years as inflation nears 4.1%, though the pause in hostilities trimmed the probability of an increase to 30.5% from 37.4% at Friday's close, according to CME Group's FedWatch tool.
  • DeFi tokens led the crypto recovery with AAVE rising 9%, LDO 9.39% and ONDO 7%. PUMP surged 12.24% to push its market cap toward $800 million from $570 million just two weeks ago.

The crypto market opened the week on a positive note as a shift in the Middle East offered a modicum of relief to risk assets. The U.S. and Iran paused strikes over the Strait of Hormuz, sending Brent crude tumbling from above $100 to around $87 per barrel as mediators continued talks.

The move was felt across multiple asset classes. Nasdaq 100 and S&P 500 index futures are up 1.36% and 0.80%, respectively, while gold and silver are both higher as inflation fears unwind. The CoinDesk 20 Index (CD20) has gained 0.1% since midnight UTC, 1.6% over 24 hours.

Bitcoin BTC$65,385.72 is lower since midnight at $65,200, though this follows a spike to $65,600 at the start of futures trading on Sunday. The little-changed reading masks an underlying improvement in sentiment.

Ether (ETH) outperformed bitcoin on Monday, rising 0.51% to $1,963 and approaching the psychologically significant $2,000 level for the first time since the beginning of June.

The Fed is meeting this week and faces a decision on whether to raise interest rates for the first time in three years, with inflation running at 4.1% on the back of the oil surge spurred by the Iran war.

The pause in hostilities trimmed the odds of a hike, with markets now pricing a 30.5% chance of a move on Wednesday, down from 37.4% at Friday's close, according to CME Group's FedWatch tool.

Derivatives positioning

  • Bears take the hit as BTC bounces: Bears are paying the price for BTC's positive turnaround since Sunday, which lifted the spot price back above $64,000. Futures liquidations data show forced closures of short (that is, bearish) bets accounted for most of the 24-hour liquidation tally of $312 million.
  • Futures traders sit out the bounce: Futures traders don't appear to be fully participating in the spot-price bounce. Open interest (OI) pulled back to 740K BTC from Friday's spike to over 760K BTC. However, both annualized funding rates and the 24-hour cumulative volume delta (CVD) are positive, which could suggest a bullish bias in positioning.
  • ETH futures confirm the outperformance: ETH outperformed BTC over the past 24 hours, extending the trend seen since the June 6 market bottom, and futures data appears to validate the price action.
  • OI in ETH futures has jumped to 14.66 million ETH, the highest since June 7. More notably, funding rates remain positive, and ether’s 24-hour OI-adjusted CVD is the most positive among major cryptocurrencies. That’s a sign bulls may be leading the price action through market orders rather than passive limit orders.
  • OI movers, gainers and laggards: Other major OI gainers include XLM, LTC and XMR, while SHIB and AVAX have seen capital outflows.
  • Broader market looks bearish: Still, the broader market looks bearish, with only TRX and BNB also showing positive 24-hour CVDs. The rest of the majors have negative prints, which could point to bearish leadership elsewhere in the market.
  • Volatility indexes signal calm: Bitcoin's 30-day implied volatility index, BVIV, is in stasis near 40%, just above the recent two-month low of around 38% in a possible sign of market stability. Ether's index, EVIV, is flashing a similar signal.
  • Options skew, downside bias cooling: In Deribit-listed options, BTC puts continue to trade pricier than calls, suggesting a persistent bias toward downside protection. That said, at the front end, the put bias appears to be weakening, with the one-week put-call skew now at 9% versus nearly 13% on Friday. ETH skews are overall much lower than BTC's, pointing to relatively measured demand for downside protection in ETH.

Token talk

  • DeFi tokens are the standout winners on Monday, with AAVE surging 9% and LDO$0.4033 rising 9.4% over the past 24 hours, while Ondo ONDO$0.4140 extended its recent run with a 7% gain.
  • Lighter (LIT) reversed course, rising 4.71% since midnight UTC and 8.91% over 24 hours after several sessions of profit-taking, suggesting sellers may have exhausted themselves in the $2.13 range and the token is attempting to rebuild.
  • PUMP$0.002132 was Monday’s top performer, increasing by 12% over 24 hours, continuing a run of speculative interest that has pushed it toward an $800 million market cap. Just two weeks ago it was at $570 million.
  • Zcash (ZEC) struggled to keep pace with its peers, falling 1.95% to $497 as the privacy coin gave back some of its recent gains. Rival monero (XMR) shed 1.24% in a sector-wide pullback.
  • CoinMarketCap's Altcoin Season indicator has risen to 55/100 and the average relative strength index (RSI) recovered to 51.88, both pointing to a market that is gradually improving in terms of sentiment.

Crypto Flows, Share and the Selective Rotation

Market Spotlight Square Image

Crypto Flows, Share and the Selective Rotation

Markets repositioned since June, but Binance held share (~55% user funds, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.

Markets repositioned since June, but Binance held share (~55% user funds, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.

Why it matters:

Markets repositioned since June, but Binance held share (~55% user funds, ~24% spot) and drew net inflows in early July while the tracked market saw outflows.

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