Bitcoin investors hold nearly $70,000 in protection for the flagship digital asset, which has recently bought around $50,000 worth of protection despite outperforming gold, the S&P 500, and the US dollar during the ongoing Iran war.
According to crypto slate According to the data, Bitcoin was trading at around $70,688 at the time of writing. So even if spot prices remain strong, hedging around the $50,000 level means investors are wary of a drawdown of about $20,000.
Contrast has become one of the clearest signals in the market. While Spot Bitcoin showed resilience through the first phase of the dispute, the derivatives market still sees traders paying for downside insurance.
At Deribit, the latest public option flow notes show buying in the $50,000 to $60,000 put zone, along with put spreads and new downside structures for March, following attacks on Middle East energy infrastructure and rising US producer prices.
This split suggests that investors are no longer treating Bitcoin as a unilateral war trade. Instead, they are weighing two outcomes simultaneously.
For one, Bitcoin continues to absorb geopolitical stress better than most expected. The other is that the oil crisis is spilling over into inflation, pushing interest rate cut expectations further out of reach, driving down risk assets and forcing Bitcoin back into the low $50,000s.
Middle East crude oil is rising faster than Brent
Oil helps explain why that hedge holds. According to Reuters, Brent hit an intraday high of $119.13 on March 19 before settling at $108.65 a barrel, while West Texas Intermediate hit $100.02 to end at $96.14. Brent traded at $107.29 after hitting $119 a day earlier.
Macro analysis platform Kobeissi Letter noted that even more severe developments are occurring in the Middle East itself.
Dubai crude, a regional benchmark more closely tied to Gulf exports, hit $166.80 on March 19, the company said, while spot cargo prices for crude oil and fuel also set records as the conflict over Iran disrupted shipping through the Strait of Hormuz.
Omani oil prices rose to $167 per barrel, while Brent crude remained around $113 and WTI traded around $97, the widest gap between regional and global benchmarks in years.
This divergence changed the market’s view of the oil crisis. Brent remains the key benchmark, but greater stress has been felt in Gulf-related cargoes, with traders pricing in the direct impact of transport disruptions, lower exports and supply concerns around the Strait of Hormuz.
The Kobessi letter explains:
“At the beginning of the war, U.S. oil prices soared due to uncertainty. However, once the Strait of Hormuz was closed, markets began to reassess risks. About 18% of the world’s crude oil supply was offline while the Strait of Hormuz was closed.”
So once the war premium shifted from futures to physical barrels, it became difficult for Bitcoin traders to ignore macro risk.
This essentially shifts the question for crypto investors from whether oil prices are rising to whether rising oil prices will remain within global benchmarks, or whether supplies will continue to flow through the Middle East cargo market, prolonging the rise in inflationary pressures.
Why traders still buy downside protection
This background is clearly visible in Bitcoin derivatives.
Deribit’s March 19 note described the purchase of $50,000 to $60,000 puts and said downside protection would be provided through a risk-reversal structure for April and December as energy shocks and inflation statistics register.
The current market flow structure also adds nuance, with some recent downside positions expressed through put spreads and risk reversals rather than outright crash bets.
This suggests that markets manage costs and define risks rather than simply preparing for panic. Investors are still paying for defense, but they are doing so using target structures near specific low frequencies.
Meanwhile, broader derivatives data points in the same direction. According to K33 Research, open interest in CME Bitcoin futures has once again exceeded 110,000 BTC, with indefinite open interest hovering between 260,000 and 270,000 BTC.
It also announced that the 7-day average funding rate was -2.2%, and the 30-day average was negative for 18 consecutive business days, the longest period since December 2022.
In fact, even though Bitcoin is trading near the top of its recent range, the futures and perpetual markets remain on the defensive.
Deribit’s weekly report with Brock Scholes showed similar caution regarding options. BTC’s at-the-money implied volatility was around 50%, 7-day implied volatility was 52%, and the forward implied yield curve was flat at 2% to 3% across tenors.
Although the put and call skew had recovered from the late February lows, the surface had not yet rotated toward the call. As a result, traders were no longer chasing downside hedges at the same pace as at the beginning of the month, but they were still willing to pay for protection.
Glassnode’s positioning data reinforces that picture, showing that while perpetual funding remains firmly negative, directional premium remains bearish, with directional P/E premium turning negative for the first time since 2022.
This means that even after Bitcoin recovered from its recent lows, traders were still leaning short.
What comes next after Bitcoin?
The good thing is that this hedge-oriented positioning is fuel for the squeeze. Glassnode said the combination of crowded short selling, negative funding, and easing options stress leaves Bitcoin vulnerable to further squeeze-driven upside if spot demand continues to recover.
In that setup, the same defensive posture that currently reflects caution can turn into a forced buy if traders have to cover their shorts with strength.
On the other hand, CryptoQuant’s more constructive scenario shows the same.
According to the crypto analysis firm, daily demand from accumulator addresses remains high at 224,700 BTC, above the monthly average, and exchange outflows reached 11,300 BTC in three days. At the same time, Coinbase premium remains positive, suggesting that US buyers are still active.
Under that view, institutional investors are soaking up liquidity while retailers are selling off for the war headlines, creating the conditions for a bear trap rather than a bust.
However, the downside case remains associated with broader conflicts and more persistent inflation shocks. Cryptoquant said the Fed’s restrictive policies could continue for a long time if the U.S. sends more troops to Iran and the conflict escalates further.
In this scenario, it becomes more likely that BTC will revisit its February bottom near $60,000, with a final liquidation zone near $54,800.
For traders trying to time the next entry, the more useful signals may be more about positioning than headlines.
CryptoQuant’s framework argues that the price could continue to fluctuate between $69,000 and $65,000 amid intense military tensions, and a clearer entry could only occur if the Bitcoin price momentum indicator returns to the balance point near 50 and begins to show a reversal in the support area.
(Tag translation) Bitcoin
