US-Iran Mixed Signals Leave Options Markets Uncertain

On Wednesday morning, Bitcoin had staged a small recovery to $69K alongside other risk-on assets, retracing part of the drawdown seen through March as geopolitical tensions in the Middle East showed tentative signs of easing. 

However, Thursday morning saw BTC fall 3% to give up those gains and return towards the $66K level as Trump promised to strike Iran ‘extremely hard’. 

Both the relief rally and subsequent crash occurred in tandem with other risk-on assets as crypto price action continues in large part to suffer from geopolitical uncertainty.

While short tenor options show a preference for puts, longer tenors show less bearish positioning than they did one week ago

In contrast to short tenor skews, green shoots of a recovery in sentiment are indicated in Block Scholes’ Risk Appetite Index, which has begun to recover from extreme bearish levels and now trends higher in both BTC and ETH. The -0.5 level has historically marked a transition away from panic-driven positioning and has acted as an indicator of the beginning of bullish momentum.