A sharp escalation in Middle Eastern tensions sent shockwaves through global financial markets during early Asian trading hours, causing a massive surge in oil prices and spurring flights to safety.
Bitcoin (BTC) had no immunity for confusion and experienced a noticeable price drop as traders scrambled for downside protection as they proved with a slow, dramatic crash of short-term options.
The 7-day skew of the Bitcoin option is a key metric measuring the relative costs of bullish calls and bearishes, listed on DeRibit and plunged to -3.84%.
This marks the lowest point since April 16th, according to Amberdata data.
In fact, this means that Put Options, which provides protection against price drops, has become the most expensive in three months compared to call options.
Additionally, the surge in demand for these protective puts dragged 30- and 60-day skew into negative territory, indicating a broader shift to attention among market participants.
Traders usually buy put options to hedge existing long positions in the spot or futures market or to make a direct profit from the expected price decline.
Puts’ clear preferences show that amid growing geopolitical uncertainty, there is growing anxiety about Bitcoin’s short-term trajectory.
Bitcoin prices reflected this tension, reflecting this tension, dropping to $103,150 to the 50-day Simple Moving Average (SMA), extending their 24-hour loss to 4.59%.
The decline represents a significant setback from the beginning of the week when prices temporarily surpassed the $110,000 mark.
Market Bulls may want a 50-day SMA to provide a critical level of support. The patterns observed when this level of support failed in February are observed, as the sustained break below it could attract further sales pressure.
When the geopolitical cauldron boils, oil spikes
The catalyst for turbulence in this market was a dramatic escalation in the Middle East.
WTI crude price per barrel surged by over 6% to $74.30, reaching its highest level since February 3rd, extending weekly profits to an impressive 13%.
This sharp rise in oil prices reportedly followed news of Israeli airstrikes against Iran.
FOD policy under aggressive shadows and scrutiny
The sudden, large surge in oil prices tends to affect global inflation, and this latest surge is no exception.
There is growing concern that this could inject new inflationary pressures into economies around the world when President Donald Trump’s ongoing trade war already threatens to destroy economic stability and fuel inflation.
This confluence of factors can significantly reduce market expectations for the Federal Reserve’s interest rate cuts.
As inflation re-accelerates, the Fed will likely be less likely to ease monetary policy, increasing lower volatility in both stocks and cryptocurrencies.
At the time of writing, futures tied to the S&P 500 were trading 1.5% lower in a day, reflecting broader risk-off sentiment.
Traditional markets retreat from geopolitical shocks
The response in traditional markets was rapid and pronounced. US stock index futures fell roughly 1.5% overall, following news from the Middle East.
European market futures reflect this decline, falling at roughly the same margin.
On the classic flight to safety, bond prices were higher as investors sought evacuation from volatility.
Another traditional safe haven asset, Gold, also saw demand rise, trading at $3,428 per ounce, adding about 0.75% over the past hour.
As mentioned earlier, crude oil had surged from an even more dramatic 9% to a $74 per barrel shortly after the report.
Treasury yields for 2010 have soaked two basis points at 4.32%, indicating an increase in US government debt demand.
The currency markets reflect shift risk situations as the US dollar has won against the euro and the British pound, but have lost their position against traditional safe seafarer currencies like the Japanese yen and Swiss franc.
