Bybit and Block Scholes Report Highlights Crypto Market Resilience Amid Geopolitical Tensions

Bybit, the worlds second-largest cryptocurrency exchange by trading volume, has released the latest Bybit x Block Scholes Crypto Derivatives Analytics report, offering an in-depth analysis of digital asset markets as geopolitical tensions in the Middle East weigh on global financial sentiment.

Key findings:

• Major cryptocurrencies demonstrated resilience despite the worsening macro and geopolitical backdrop. Bitcoin briefly breached $74,000 while Ethereum approached $2,200, following a recovery in sentiment after both assets briefly dipped to around $63,000 and $1,800 following the initial outbreak of hostilities in the Middle East.
• Demand for optionality increased after the announcement of U.S. airstrikes against Iran and subsequent retaliation across the Gulf region. Short-term implied volatility rose to around 60 percent, moderately inverting the term structure of volatility, though absolute implied volatility levels remain well below the peaks seen in early February, when short-tenor volatility reached around 100 percent.
• Relative to delivered volatility, implied volatility is currently trading lower across both short- and mid-dated tenors, indicating a more measured demand for downside protection compared with early February, when options pricing reflected a strong rush for hedging.
• Funding rate dynamics suggest the recent altcoin selloff was driven more by selling in perpetual futures markets than in spot markets. Bitcoin, Ethereum and Solana funding rates turned negative over the weekend following Irans response to U.S. missiles, signaling futures prices trading below spot levels as short traders paid to hold positions.
• Bitcoin funding rates recovered to neutral levels relatively quickly, while Ethereum funding rates experienced a second leg lower before returning to neutral with a lag, and Solana funding rates remained mostly negative, indicating comparatively stronger bearish sentiment in altcoins.
• Institutional demand showed tentative signs of recovery. During the first three trading days of March, spot Bitcoin ETFs accumulated approximately $1.145 billion worth of Bitcoin, while Strategy, the largest Bitcoin digital asset treasury firm, purchased about $204 million worth of Bitcoin last week, marking the firms largest purchase since late January.

The report shows that despite heightened geopolitical tensions, crypto-asset spot prices have sustained a recovery in sentiment after the initial market reaction to the conflict, with major assets demonstrating resilience against broader macro uncertainty.

Options markets also reflected this dynamic. Traders bid up optionality immediately after confirmation of the U.S. airstrikes, pushing short-term implied volatility higher and briefly inverting the volatility term structure, though the inversion has since eased slightly.

At the same time, options markets remain bearishly positioned across the volatility surface, although sentiment has moderated compared with the immediate aftermath of the strikes. When Bitcoin revisited $63,000, put options traded with around a 15 volatility-point premium over calls, reflecting demand for downside protection. The 25-delta put-call skew subsequently rebounded alongside the recovery in spot prices.

“Since the onset of the Middle East conflict, major cryptos have remarkably fared better than traditional safe haven assets, outperforming the likes of the U.S. dollar and gold,” said Han Tan, Chief market analyst at Bybit Learn. “Still, digital assets have a lot more to prove before they can rightfully claim ‘safe haven’ status, at least in the mainstream markets eyes. The ongoing conflict may well trigger further bouts of volatility across global financial markets, and it remains to be seen whether the resilience shown thus far in crypto prices can be sustained.”

Overall, the analysis indicates that although options markets remain defensively positioned, bearish sentiment has moderated compared with the immediate aftermath of the initial strikes.

The full Bybit x Block Scholes report is available for download.