The crypto market is back on top after a two-week ceasefire between the US and Iran removed some of the geopolitical uncertainty and sent oil prices tumbling. Still, the dynamics of the energy market are such that it may be premature to assume that animal spirits will return to risk assets.
Bitcoin has risen 3% to $71,600 over the past 24 hours, while ether (ETH), XRP (XRP), and solana (SOL) have all gained more than 5%. The CoinDesk 20 index has outperformed bitcoin, rising 4.2 percent, which is typical when altcoins outperform the market leader.
Oil has plunged after Iran agreed to open the Strait of Hormuz, a key route for global shipping. WTI crude futures trading on the NYMEX are down nearly 16 percent to $95 per barrel. When crude oil falls sharply, inflation fears subside, Fed rate hikes weaken, and crypto tends to rise.
Supporting the move is a drop in bitcoin and ether 30-day implied volatility, which measures market fear. Since the debut of spot ETFs two years ago, these numbers have evolved into VIX-like metrics that rise during sell-offs and calm as panic subsides.
Sentiment could get another boost later if Morgan Stanley’s bitcoin ETF debuts with strong volumes and inflows on day one. It would reinforce the story of institutional adoption.
“The recent pattern has been institutional demand showing up again through ETFs. When inflows are present, dips are bought faster and the market holds higher levels even as momentum cools,” Marex said.
Still, there is reason to be cautious. The overnight rally was driven in part by short positions that were liquidated after traders betting on a US-Iran escalation were caught off guard. $431 million worth of shorts were liquidated in 24 hours, the most since March 4, according to Coinglass. In cases like this, the market often chops around and waits for new demand. Without it, gains can quickly reverse.
While oil is down to $85, it is still $30 higher than before the conflict started on February 28. Furthermore, the ceasefire is temporary and not a permanent solution, and for oil to fall further, Hormuz tanker traffic and insurance rates must normalize to pre-war levels.
“This remains a pause rather than a durable solution, with the ceasefire contingent on how Iran manages the passage through Hormuz over the coming weeks,” QCP Capital said. “This caution matters because the physical damage narrative has not gone away.”
Until then, oil could stay close to $100 and keep risk assets like crypto at bay. Pay attention.
What is trending
Iran Ceasefire Effect: Oil Plunges as European Markets Rise (euronews): Oil prices fall below $100 a barrel barrel, and European and Asian markets rose sharply after the United States and Iran agreed to a two-week ceasefire that includes the reopening of the Strait of Hormuz.
Dollar Hits Four-Week Low as Ceasefire Boosts Risk Appetite (Bloomberg): The dollar fell as much as 0.97% to a four-week low as the deal cut government interest rates, further reducing support. The South African rand and the Swedish krone each rose around 2%.
European shares rise 4% after US-Iran ceasefire deal; travel stocks lead 7% gains (CNBC): European stocks opened sharply higher on Wednesday. The pan-European Stoxx 600 index was 3.4% higher, with all sectors except oil and gas in the green. Autos, miners and travel stocks led the gains, rising 5.6%, 6% and 7.3% respectively.
US bank with $1.9 trillion in assets could debut its bitcoin ETF Wednesday (CoinDesk): Morgan Stanley Bitcoin Trust could begin trading NYSE Arca under the ticker MSBT, Bloomberg ETF analyst Eric Balchunas said on X, an NYSE listing announcement pointing to an April 8 launch.
Today’s signal
The chart shows bitcoin’s daily price swings in candlestick format since October. The yellow line represents the 50-day simple moving average (SMA) of the price and the white line shows the 100-day average.
As shown, the spot price has moved significantly above the 50-day moving average, a much-watched measure of short-term trends. The move indicates a strengthening of the bullish momentum and follows the latest bounce from the trendline support from the February low.
Prices may therefore see more upside ahead, with $76,100, the 100-day average, as the next level to watch. On the downside, the late March low near $65,000 is expected to act as a demand zone supporting pullbacks. If that level fails, prices could fall to $60,000.
