Escalating tensions between Iran and Israel have rippled through the cryptocurrency markets, triggering a massive selloff that saw over $860 million in digital assets liquidated. The looming threat of conflict between the longstanding adversaries has cast a cloud of uncertainty, prompting investors to flee from riskier assets like cryptocurrencies in favor of safer havens.
The impact was most pronounced in the Ethereum market, where a significant downside skew in risk reversal indicators signaled traders were positioning for a price drop. This bearish sentiment proved well-founded as Ether, the second-largest cryptocurrency, shed over 5% of its value, plunging below $3,100. The sell-pressure on Ether was exacerbated by its role as a hedge for altcoin traders, who often use Ether put options to protect their positions during market downturns.
The crypto market’s fear was further amplified by a steep decline in perpetual swap funding rates, which plunged to over -40%, the deepest negative territory seen this year. Such deeply negative funding rates are a clear sign of overwhelming bearish sentiment among traders. Moreover, the cryptocurrency forward curve collapsed, with the front-end rates falling below 10%, painting a bleak short-term outlook for digital asset prices.
