Coinbase analysts have flagged inherent risk to the crypto market ahead of President Donald Trump’s April 6 deadline on the Iran deal. Trump had earlier threatened to scale up attacks on Iran’s electric power plants after bombing one of its bridges.
From a market perspective, Coinbase’s global head of investment research, David Duong, said the standoff could put crypto in a ‘precarious position.’ He added,
The deadline is more about how a drawn-out standoff could reprice geopolitical risk premia across energy and risk assets. That once again leaves crypto in a precarious position for this upcoming weekend.
In case of a deal, Duong noted that oil risk could stabilize and “revert risk assets to macro fundamentals across the board.” However, if the crisis escalates, then supply shocks in crude oil could increase the odds of a global recession.
In a recent statement, Trump had projected the war could be over in two to three weeks. If so, Doung estimated a “short-lived volatility.” Meanwhile, however, the analyst said,
We think markets will continue to price a modest geopolitical risk premium into crypto until there is a clearer direction on when the conflict could end.
Will oil shocks add pressure on crypto again?
In March, the oil surge brought the year-to-date rally to 78%, while the rest of the risk assets, including U.S. stocks and gold, compressed further. In particular, BTC showed initial strength, but the momentum faded at the end of March. Notably, this brought the YTD loss to over 25%.
Interestingly, Ethereum fell harder, declining by about 34% and setting the tone for the broader altcoin market, with select tokens printing new lows.
In other words, any direction the West Asia crisis takes will impact the oil price, which would ultimately affect risk assets, including crypto. In fact, the broader market sentiment has stayed in ‘extreme fear’ during the war in March.
Now, some recent investors were closing their BTC positions after breaking even. This was illustrated by the profitability metric, Spent Output Profit Ratio (SOPR), nearing 1 as BTC hovered near $68K.
The same market fear was also expressed across the Options market, where institutional players hedge against risk. According to the Options platform Derive, there was increased demand for protection against downside risk for expiry at the end of April.
Overall, the market was on edge ahead of Trump’s deadline.
Final Summary
- Coinbase warned that Trump’s April 6 deadline could put more pressure on the already fragile crypto market
- The West Asia crisis and the resulting oil surge have put risk assets on edge.
