AI Summary
Show More
Quickly grasp the article's content and gauge market sentiment in just 30 seconds!
With the conflict in the Middle East now in its second week and BTC trading around $70K, Block Scholes’ Risk Appetite Index indicates tentative signs of panic bottoming out.
In fact, since the US strikes on Iran began, BTC has outperformed both the S&P 500 index and gold, and even the currently preferred safe-haven: the US dollar asset gold.
READ MORE (published March 4th): US dollar vs. Bitcoin - which is the ultimate safe haven?
Options markets have (for the most part) revealed a willingness from traders to fade the geopolitical risk, with implied volatility levels still relatively low, and skew now in a normalization period following the peak panic that was priced in during the month of February.
Nonetheless, that does not mean options traders have switched bullish just yet.
Volatility smiles remain tilted towards put contracts, though they trade with lower premiums than observed earlier in the year.
Separately, with the Strait of Hormuz effectively at a standstill and subsequent volatility in markets, crude oil has become one of the most talked about assets over the past two weeks. Prices have soared from $67 to nearly $120 before tumbling back lower for the time being. Despite moving upward alongside oil in Trump’s first-term interactions with Iran, BTC has shown a far less sensitive reaction to 2026's flare-up in energy supply chains.
Block Scholes’ Risk Appetite Index measures the level of euphoria (above 1) or panic (below -1) in the spot market. Momentum in this index shows a strong relationship to spot returns.
With the war in the Middle East now in its second week, BTC has continued to remain resilient, holding up above its pre-war levels. On Monday (March 9th), President Trump indicated that “the war is very complete, pretty much” and that the US’s military operation was ahead of schedule.
Trump’s message contrasts more recent signals from senior White House officials who appear more willing to engage in further efforts in the Middle East, though it was enough to spark a rebound in risk sentiment at the start of the week. US equities reversed their intraday slide to finish higher on Monday, while crude oil prices plunged from $120 down below $90. Since then, BTC has continued to hover at $70K, while US equities continued to modestly sell off.
In fact, since markets opened on the Monday after the initial strikes, BTC has actually outperformed both the S&P 500 and traditional safe-havens - gold and the US dollar.
We do note, however, that the outperformance has occurred over a short window only. When we zoom out, and look at year-to-date performance for example, it is still crypto assets that are lagging behind US equities, and precious metals, and the greenback:
(year-to-date performances, as of March 12th, 2026)
As such, BTC’s current outperformance amidst the geopolitical backdrop could just be a reflection of the fact that crypto assets have sold off far stronger relative to US equities and precious metals over the past six months.
BTC, for example, is still more than 40% below its all-time high, while ETH is closer to 60% below its August peak.
On the other hand, gold is less than 7% down from its all-time high, while the S&P 500 is less than 4%.
The sharper selloff in BTC has massively eschewed the previously strong linear relationship that we had observed between BTC and the S&P 500 index since 2024, and may therefore be providing BTC some space to rally harder whenever risk-appetite modestly rebounds.
The resilience in crypto spot prices since the escalations began has continued to be reflected in BTC’s derivatives markets, where the demand for protective put positions has not reached extreme levels.
After rising to the highest level since 2022, short-dated implied volatility settled around 50% in mid-February before jumping 20 percentage points during the start of the Middle East conflict. In absolute terms , however, implied volatility (IV) remained far lower than the panic levels that were priced in during February’s peak when BTC fell towards $60K. Since then, IV has once more returned back towards the same 50% floor and the term structure has compressed.
That suggests two things:
Options markets have stabilized since last month
Options traders are, so far and for the most part, fading the geopolitical risk
Perhaps it is President Trump’s reputation of TACO (‘Trump Always Chickens Out') that has traders pricing in a more optimistic base case for the length and economic impact of the conflict?
We see a similar normalization away from the peak panic that was seen in the February sell-off when looking at BTC’s volatility smiles. As we mentioned last week, options traders are still skewing premia higher for bearish put options.
Additionally, the past two weekends have seen put-demand spike up as escalations tempered suggesting some increased demand for downside hedging during less liquid trading hours. However, the 30 vol point premium that put contracts traded with in February has now compressed to a much smaller 6%.