The recent Iran-Israel conflict has caused turmoil in the cryptocurrency market, leading to an $860 million sell-off triggered by negative funding rates.
Geopolitical instability historically prompts investors to move away from riskier assets like cryptocurrencies, opting for safer investments. This trend typically triggers sell-offs across various risk asset classes, as seen in the recent market downturn.
Over the past 24 hours, this shift affected 261,054 traders, resulting in the liquidation of $860.82 million in assets, with the overall crypto market cap dropping by nearly 5%.
QCP Capital identified the ETH risk reversal indicator as a significant factor in the liquidation. They noted a noticeable downside skew in the Ethereum risk reversal on Friday, signaling a potential price drop.
The bearish skew of the risk reversal suggests that traders were betting on a decrease in ETH’s price, likely using it as a hedge. This technical indicator accurately predicted ETH’s decline by over 5% to $3100.
Typically, speculators holding long positions in alternative cryptocurrencies (altcoins) use ETH puts to shield themselves against market downturns, making ETH prices particularly sensitive to shifts in sentiment.
The fear gripping the crypto markets was evident, reflected in the negative swing of perpetual swap funding rates. These rates plummeted to over -40%, marking the most significant negative funding this year and indicating a strong bearish sentiment.
Furthermore, this apprehension affected the forward curve, with the front end dropping below 10%, indicating a pessimistic short-term outlook for cryptocurrency prices.
