The crypto market rebounded 1.2% on Monday to $2.4 trillion in a relief rally amidst signs of potential de-escalation of the ongoing U.S. and Iran war in the Middle East.
Summary
- The crypto market rebounded modestly as hopes of U.S.–Iran de-escalation eased risk-off sentiment, lifting major assets including Bitcoin and Ethereum.
- Relief rally came despite heightened derivatives volatility, with roughly $350 million in liquidations led by long positions, indicating fragile market positioning.
- Macro risks persist as rising oil prices and hawkish rate expectations continue to weigh on sentiment, limiting upside despite a slight improvement in the fear and greed index.
Bitcoin (BTC) rose 1.4% to back above $67,600 after dropping to a 4-week low around $65,000 earlier today. Ethereum (ETH) was up 2.2% to over $2,000, while major crypto assets such as XRP (XRP), Solana (SOL), and Dogecoin (DOGE) posted gains between 1 and 2% each.
Despite a rebound in spot crypto prices, significant volatility was observed across crypto derivatives markets. Data from Coinglass shows that over the past 24 hours, nearly $350 million worth of positions were liquidated from the market, with the brunt of the liquidations coming from trades that held long positions.
Meanwhile, the crypto fear and greed index jumped 4 points to 27,, suggesting some easing, although overall sentiment remains shaky.
The crypto market took a breather on Monday after reports emerged that Pakistan is preparing to host peace talks between the U.S. and Iran to end their war in the Middle East region after diplomats from both sides agreed to meet.
The news seemed to have calmed investor nerves as the war entered its fifth week, with both nations going back and forth against each other’s energy and military infrastructure.
The two-day talks in the Pakistani capital that began on Sunday are being led by Pakistani Foreign Minister Ishaq Dar over possible ways to bring an end to the war in the region as well as the blockade in Islamabad.
This came after Iran allowed 20 Pakistani commercial vessels to pass through the Strait of Hormuz, easing a naval blockade that has stifled regional trade.
Elsewhere, U.S. President Donald Trump has recently instructed the Pentagon to pause strikes on Iranian power and energy infrastructure for five days to allow for these productive talks.
Concerns remain
Meanwhile, Iranian parliament speaker Mohammad Bagher Qalibaf has dismissed the proposed talks in Islamabad as a tactical distraction after the arrival of thousands of U.S. troops in the Middle East, stating that Iran was ready to retaliate if necessary.
Earlier, Trump had announced that the U.S. would deploy 10,000 additional troops to expand its military options in the region.
Amidst the ongoing tension, traditional safe-haven assets such as gold and precious metals continued their march. Gold rose by 1.1% over the day to $4,544, while Silver gained by 1.5%.
Against this backdrop, oil prices across the globe have surged back above $100. West Texas Intermediate (WTI) crude oil was trading at $100.7, up 1% over the day, while Brent crude was up 2.2% to $115.
This trend could further dampen investor sentiment, as rising crude oil prices tend to fuel fears of persistent inflation. Such inflationary pressure could, in turn, motivate the Federal Reserve to delay highly anticipated rate cuts, keeping borrowing costs higher for longer.
At press time, the odds of the Fed holding interest rates steady at 3.5% to 3.75% stood at 96.4% while only 3.6% of market participants held out hope for a 25bps reduction.
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