Crypto Market Faces Steep Decline

Bitcoin and Ether experienced sharp declines alongside other risk assets following increased tensions in Iran, which led to a 10% surge in oil prices. Derivatives data indicates traders are preparing for further price drops.

Geopolitical Factors Drive Selloff

The crypto downturn was triggered by comments from U.S. President Donald Trump on Wednesday evening, stating that conflict in Iran would continue with “extensive strikes.” He added, “Over the next two to three weeks, we’re going to bring them back to the stone ages where they belong.”

Market Reaction and Key Figures

Brent crude oil rose approximately 10% to $108 per barrel following Trump’s statement. Simultaneously, the Nasdaq 100 and S&P 500 futures fell by 1.5% and 1.1% respectively, while the U.S. dollar increased by 0.5% to surpass 100 points.

Bitcoin and Ether Performance

Bitcoin (BTC)

Bitcoin’s price decreased by over 2% since midnight UTC, accompanied by a rise in open interest in USD- and USDT-denominated futures. Perpetual funding rates have reached their most negative level since March 12, signaling bearish trading activity.

Ether (ETH)

Ether performed worse, tumbling 4.4% as the market reacted to the risk-off sentiment. Funding rates for Ether are at their most negative since October of last year, indicating a strong bias towards bearish bets.

Liquidations and Volatility

Nearly $400 million in futures positions were liquidated due to margin shortfalls, a 17% increase compared to the previous day. Despite the renewed risk aversion, 30-day implied volatility for both Bitcoin and Ether has remained stable, suggesting orderly selling rather than panic.

Sector-Specific Performance

CoinDesk's DeFi Select Index experienced the largest drop, falling 5.9% since midnight UTC. The CoinDesk Computing Select Index also declined, dropping by 5%. Ethena led the downside, falling over 10%, with significant drawdowns observed in DeFi tokens like UNI, LDO, SKY, and AAVE.

Algorand was an exception, rising by approximately 0.8% and continuing a recent rally of 22% over the past week. CoinMarketCap’s “altcoin season” index decreased from 50/100 to 42/100 since March 30, indicating broader sector weakness.

Privacy Models and Public Firm Liquidations

As blockchain adoption grows, the effectiveness of many crypto privacy models is weakening. Encryption-based models, such as Zcash, are proving more resilient. Public firms, including Empery Digital, Genius Group, and Riot Platforms, have been liquidating Bitcoin reserves this week to address debt, liquidity needs, or strategic shifts towards AI and HPC.