The crypto market rebounded 1.2% on Monday to $2.4 trillion in a rally amid signs that the ongoing US-Iran war in the Middle East may be easing.
Summary
- The crypto market rebounded slightly as hopes that the US-Iran de-escalation dampened risk-averse sentiment, lifted major assets including Bitcoin and Ethereum.
- The relief rally came despite volatility in derivatives, with nearly $350 million in liquidations led by long positions, reflecting a fragile market position.
- Big risks continue as oil prices rise and hawkish rate expectations continue to weigh on sentiment, reducing the upside despite a slight improvement in the fear and greed index.
Bitcoin (BTC) rose 1.4% to return above $67,600 after falling to a 4-week low around $65,000 earlier today. Ethereum (ETH) rose 2.2% to over $2,000, while major crypto assets like XRP (XRP), Solana (SOL), and Dogecoin (DOGE) posted gains of between 1 and 2% each.
Despite the rise in crypto prices, significant volatility has been observed in all crypto derivatives markets. Data from Coinglass shows that in the last 24 hours, about 350 million worth of positions were liquidated from the market, with the bulk of the liquidation coming from markets holding long positions.
Meanwhile, the crypto index of fear and greed jumped from 4 points to 27, suggesting some relief, although overall sentiment remains shaken.
The crypto market took a breather on Monday after reports emerged that Pakistan is preparing to host peace talks between the US and Iran to end their war in the Middle East region after diplomats from both sides agreed to meet.
The news seemed to dampen investor sentiment as the war entered its fifth week, with both countries escalating over power and military infrastructure.
The two-day talks in the Pakistani capital that began on Sunday were led by Pakistan’s Foreign Minister Ishaq Dar on possible ways to end the war in the region and the blockade of Islamabad.
This came after Iran allowed 20 Pakistani commercial ships to pass through the Strait of Hormuz, easing the blockade that has hampered regional trade.
Elsewhere, US President Donald Trump recently ordered the Pentagon to temporarily suspend strikes on Iranian energy and infrastructure for five days to allow for these productive negotiations.
The worries are still there
Meanwhile, Iranian parliament speaker Mohammad Bagher Qalibaf dismissed the proposed talks in Islamabad as strategic distractions after the arrival of thousands of US troops in the Middle East, saying Iran is ready to retaliate if necessary.
Earlier, Trump had announced that the US would send 10,000 additional troops to expand its military options in the region.
Amid the ongoing tensions, traditional safe-haven assets such as gold and precious metals continued their march. Gold rose 1.1% intraday to $4,544, while silver gained 1.5%.
Against this backdrop, global oil prices have climbed back above $100. West Texas Intermediate (WTI) crude was trading at $100.7, up 1% intraday, while Brent crude was up 2.2% at $115.
This trend may dampen investor sentiment, as rising crude oil prices tend to fuel fears of continued inflation. Such inflationary pressure may, in turn, encourage the Federal Reserve to delay much-anticipated rate cuts, keeping borrowing costs higher for longer.
At press time, 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 expected a 25bps cut.
Disclosure: This article does not constitute investment advice. The content and materials presented on this page are for educational purposes only.
