Bearish sentiment deepens in crypto as volatility climbs and hedging activity increases

Crypto Markets Show Strain as Volatility Rises and Risk Appetite Fades

Bitcoin’s brief overnight rally quickly reversed as geopolitical tensions and rising oil prices fueled volatility and a broader risk-off mood across crypto markets.

The largest cryptocurrency climbed to around $68,300 shortly after midnight UTC on Tuesday before retreating to near $66,500. The initial move higher followed reports suggesting U.S. President Donald Trump was open to ending the Iran conflict without reopening the Strait of Hormuz. However, sentiment shifted after Israeli officials signaled military operations could continue for weeks.

The conflict, now in its fourth week, has pushed Brent crude to around $107 per barrel, intensifying inflation concerns and dampening appetite for risk assets.

While crypto markets showed relative resilience through much of March, momentum appears to be fading. Bitcoin’s repeated failure to break above the $75,000 level has reinforced signs of near-term exhaustion.

In contrast, U.S. equities remained firm, with Nasdaq 100 and S&P 500 futures each gaining roughly 0.8% on the day.

Derivatives Signal Defensive Positioning

Positioning data from derivatives markets points to growing caution among traders.

Total crypto futures open interest fell more than 3% over the past 24 hours to $103.79 billion, extending a broader downtrend. Since the start of the year, open interest has declined by over 18%, reflecting a steady reduction in risk exposure.

The pullback has been broad-based across major assets, including bitcoin, ether, solana and XRP, indicating capital outflows from core markets. Several altcoins—such as bitcoin cash, avalanche and litecoin—have seen even sharper, double-digit percentage declines in open interest.

One exception is Zcash, where futures activity has strengthened. Open interest rose over 3%, accompanied by mildly positive funding rates and buying pressure, suggesting growing bullish positioning.

On the other end of the spectrum, dogecoin has seen the most pronounced selling pressure, with the weakest cumulative volume delta among major tokens.

Volatility metrics are also trending higher. Bitcoin’s 30-day implied volatility index has climbed to 58%, up from 54% last week and now above its 50-day average—pointing to expectations of increased price swings. Ether’s volatility, however, has remained range-bound between 70% and 80% for the past week.

Options markets further highlight defensive sentiment. On Deribit, bitcoin risk reversals through late June show a clear preference for downside protection, with put options trading at an 8–10 volatility-point premium to calls. The $60,000 bitcoin put remains the most heavily concentrated position, with open interest totaling $1.5 billion.

Altcoins Lag as Market Awaits Bitcoin Breakout

Altcoins underperformed bitcoin during the latest pullback, with tokens such as NEO, Hedera and PUMP falling between 2.6% and 3.3% since midnight UTC.

A handful of assets have bucked the trend, including bitcoin cash and select AI-related tokens, which remain in positive territory.

Despite the recent weakness, broader market indicators suggest some resilience. CoinMarketCap’s Altcoin Season Index stands at 51 out of 100, indicating relative strength in recent weeks.

Looking ahead, market direction is likely to hinge on bitcoin’s next major move. A breakout above $75,000 or a drop below $62,000 could set the tone. Historically, altcoins tend to perform best during periods of bitcoin consolidation, but often struggle during sharp directional swings.