Institution: Middle East Tensions Boost Short-Term Volatility but Do Not Affect Long-Term, Some Traders are Positioning for a Rebound
March 2nd — The cryptocurrency market tested lower levels again last Saturday amid the Middle East conflict. QCP Capital noted the initial drop triggered roughly $300 million in long liquidations, but deleveraging was relatively limited—suggesting the market had pared positions ahead of the recent volatility.
Laser Digital pointed out U.S. stocks rebounded from session lows, the U.S. dollar and oil prices gave back early gains, and Bitcoin reclaimed lost ground. Traders are betting the economic impact will be limited unless energy supply routes stay disrupted.
For crypto options, the short-term reaction was strong but the long-term impact muted. QCP added that as the conflict escalated, investors were seen boosting long positions for late March—signaling some traders are positioning for a rebound after months of consecutive weak performance.
Macro-driven cautious sentiment is just as critical as geopolitical factors. Linh Tran, Senior Market Analyst at XS.com, said the market
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Tehran, the capital of Iran, is attacked with a downtown explosion.
March 2, local time — Tehran, Iran’s capital, came under attack with multiple explosions rocking several areas including the city center. Blasts were reported in Tajrish, Ferdowsi Square, the area housing the Iranian Foreign Ministry’s police unit, and other locations. The Israel Defense Forces (IDF) later confirmed its air force had launched a new round of “large-scale” airstrikes against Iranian targets in Tehran that day.
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CoinShares: Digital Asset Products Saw $1 Billion in Inflows Last Week, Ending 5 Consecutive Weeks of Outflows
March 2 — Digital asset products saw $1 billion in inflows last week, ending a five-week streak of $4 billion in outflows, according to a CoinShares report. Market sentiment was buoyed by price weakness, a technical reset, and support from whale accumulation.
From a macro standpoint, no single catalyst drove the sentiment shift, but prior price declines, breaks below key technical levels, and renewed accumulation by large Bitcoin holders appear to have fueled the reversal. More specifically, recent client discussions have centered almost entirely on identifying entry points rather than cutting exposure to the asset class.
Bitcoin was the top beneficiary, posting $881 million in inflows — though Bitcoin bear products also saw $3.7 million in inflows, underscoring ongoing divergence in market views.
Ethereum recorded $117 million in inflows, its largest weekly haul since mid-January. Both Bitcoin and Ethereum remain in net outflow territory year-to-date.
Solana added $53.8 mi
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War Pushes Expectations of Rate Cuts Up Sharply, Likelihood of Fed Cutting Rates 3 Times in 2026 Falls to 20%
On March 2, Middle East tensions pushed oil prices higher and stoked inflation fears, prompting currency markets in the U.S., U.K. and Eurozone to scale back bets on interest rate cuts.
Per swaps linked to policy meeting dates:
- The Federal Reserve’s likelihood of cutting rates three times in 2026 fell from nearly 50% last week to 20%.
- Traders no longer expect the Bank of England to deliver three rate cuts this year; the probability of a March cut dropped from over 80% to 60%.
- Odds of the European Central Bank cutting rates this year were halved, with markets pricing in just 5 basis points of easing.
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European and US Stock Futures Down Pre-market, Market Currently Flooded with Bearish Sentiment
March 2nd:
Amid geopolitical turmoil, European stocks opened sharply lower and traded poorly midday, while U.S. stock pre-market sessions saw declines across the three major indexes.
Mainstream centralized (CEX) and decentralized (DEX) exchange funding rates now signal a market-wide shift back to bearish sentiment—after a rebound to neutral on Sunday. Specific funding rates for key cryptocurrencies are in the attached chart.
**BlockBeats Note:**
Funding rates are fees set by crypto exchanges to align perpetual contract prices with underlying asset prices. They facilitate fund transfers between long and short traders (exchanges do not collect these fees) and adjust traders’ holding costs or profits to keep contract prices close to the underlying asset’s value.
**Funding Rate Guidelines:**
- 0.01% = baseline rate
- Above 0.01% = broad bullish sentiment
- Below 0.005% = broad bearish sentiment
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