Crypto Market Plummets 4% Amid Israel Iran Tensions

The cryptocurrency market experienced a significant downturn amidst escalating tensions between Israel and Iran. On June 13, following Israel's strike on Iranian nuclear facilities, Bitcoin plummeted below $103,000, marking a sharp decline. Ethereum and other major altcoins also saw substantial drops, reflecting the broader market's sensitivity to geopolitical risks. The conflict has led to a $240 billion loss in the overall value of the crypto market, with Bitcoin falling to $103,127 and Ethereum and other altcoins experiencing even sharper declines.

The escalating tensions have sparked fears of further military action, which could exacerbate the market's volatility. The conflict has sent shockwaves across the Middle East and the global financial markets, with both Iran and Israel continuing relentless strikes. The situation has led to a sea of red for crypto assets, with BTC down more than 4%, ETH more than 8%, and SOL 10% over the past week. The market-wide de-risking has resulted in negative funding rates for a slew of tracked tokens, indicating a bearish sentiment among traders.

The conflict has also impacted the derivatives market, with perpetual swap contracts and funding rates turning negative. The open interest in perpetual contracts has fallen from its June highs and has mostly been sideways above $9 billion. The funding rates for most of the nine tracked crypto tokens turned negative following reports of Israel's preemptive strike against Iran, signaling that geopolitical tensions are a significant driver of spot and derivatives markets.

The options market has also reflected the bearish sentiment, with short-tenor implied volatility for BTC options trading at just under half of the implied volatility for equivalent tenor ETH options. The 7-day realized volatility for BTC remains at 30%, compared to 70% for ETH, indicating a higher level of uncertainty in the ETH market. The ETH options markets, however, carry a less bearish tilt toward OTM puts relative to BTC short-tenor options, and for expirations beyond 30 days, the ETH put-call skew is positive.

The conflict has also led to a divergence in the performance of BTC and ETH. While BTC has held up better than other tokens, ETH's spot price has underperformed, now down nearly 9% and trading at $2,500. The sentiment in ETH options markets is holding up slightly better than in BTC's markets, with short-tenor smiles holding a less bearish skew toward OTM puts, and both open interest and options volumes dominated primarily by call options.

The conflict has also impacted the SOL market, with its spot price trading 10% lower relative to its June 11 price of $167. Despite this, open interest and options volumes are markedly dominated by call options, indicating a bullish sentiment among traders. The term structure of volatility for SOL also continues to remain unique, with the belly of the curve lifted while the front-end carries a 3 percentage point premium to the back-end.

The conflict has also led to a divergence in the performance of BTC and ETH options markets. While BTC options markets paint a more bearish picture, with 90-day options carrying a slightly positive 0.45% skew toward out-of-the-money calls, ETH options markets carry a 2 percentage point premium toward OTM puts for horizons beyond 30 days. This sentiment contrasts with what is seen in perp funding rates between the two assets, with BTC's funding rates holding up more positively over the past seven days compared to ETH's funding rates.

The conflict has also led to a divergence in the performance of BTC and ETH volatility. While BTC front-end volatility continues to trade below 40% and has dropped by 1–2 percentage points compared to last week, ETH's term structure of volatility has mostly been inverted, relative to the "normal" upward slope exhibited in BTC's term structure. The divergence between short- and long-tenor ETH options has narrowed, with the divergence between 7- and 90-day options now only 3 points.

The conflict has also led to a divergence in the performance of BTC and ETH realized volatility. While BTC realized volatility has hovered at 30% for most of the month, ETH realized volatility remains more than 2x greater than BTC's delivered volatility over the past seven days. The 30-day implied volatility and 7-day realized volatility for ETH have now also converged, indicating a higher level of uncertainty in the ETH market.

The conflict has also led to a divergence in the performance of BTC and ETH options volumes. While BTC options volumes have been relatively balanced between calls and puts, recent put volumes have far exceeded those of calls. On June 13, that divergence was as large as $100 million. Open interest in BTC options is also currently dominated by puts, indicating a bearish sentiment among traders. In contrast, ETH options volumes are dominated primarily by call options, indicating a bullish sentiment among traders.

The conflict has also led to a divergence in the performance of BTC and ETH options open interest. While BTC options open interest is dominated by puts, ETH options open interest is dominated primarily by call options. This indicates a bullish sentiment among traders in the ETH market, despite the broader market's bearish sentiment.

The conflict has also led to a divergence in the performance of BTC and ETH options skew. While BTC options markets paint a more bearish picture, with 90-day options carrying a slightly positive 0.45% skew toward out-of-the-money calls, ETH options markets carry a 2 percentage point premium toward OTM puts for horizons beyond 30 days. This sentiment contrasts with what is seen in perp funding rates between the two assets, with BTC's funding rates holding up more positively over the past seven days compared to ETH's funding rates.

The conflict has also led to a divergence in the performance of BTC and ETH volatility by exchange. While BTC volatility remains low, with front-end volatility continuing to trade below 40%, ETH volatility has been more volatile, with short-tenor volatility dropping from its highs of 77% earlier this month to 70%. The term structure of implied volatility for BTC continues to contrast with ETH's, sloping upward in contrast to ETH's almost flat shape.

The conflict has also led to a divergence in the performance of BTC and ETH volatility term structure. While BTC's term structure of volatility has mostly been inverted, relative to the "normal" upward slope exhibited in ETH's term structure, ETH's term structure of volatility has mostly been inverted, relative to the "normal" upward slope exhibited in BTC's term structure. The divergence between short- and long-tenor ETH options has narrowed, with the divergence between 7- and 90-day options now only 3 points.

The conflict has also led to a divergence in the performance of BTC and ETH volatility surface. While BTC's volatility surface has been relatively stable, with front-end volatility continuing to trade below 40%, ETH's volatility surface has been more volatile, with short-tenor volatility dropping from its highs of 77% earlier this month to 70%. The term structure of implied volatility for BTC continues to contrast with ETH's, sloping upward in contrast to ETH's almost flat shape.

The conflict has also led to a divergence in the performance of BTC and ETH volatility by exchange. While BTC volatility remains low, with front-end volatility continuing to trade below 40%, ETH volatility has been more volatile, with short-tenor volatility dropping from its highs of 77% earlier this month to 70%. The term structure of implied volatility for BTC continues to contrast with ETH's, sloping upward in contrast to ETH's almost flat shape.