Bitcoin & Ethereum on Edge: How Middle East Tensions and Tariff Wars Are Shaking Crypto Markets

Geopolitical storms are rattling crypto''s heavyweights—Bitcoin and Ethereum—as Middle Eastern tensions escalate and global tariff wars intensify. Here''s how digital gold and its silver counterpart are reacting.

Mid-East Jitters Send Shockwaves Through Crypto

When traditional markets flinch, crypto often dances to its own beat—but not this time. Bitcoin''s price action shows uncharacteristic correlation with oil markets as regional instability grows. Ethereum''s smart contract dominance? Suddenly playing second fiddle to safe-haven narratives.

Tariff Wars: The Silent Portfolio Killer

While politicians posture with trade barriers, crypto traders face invisible taxes: volatility spikes and liquidity fragmentation. Decentralized exchanges might bypass sanctions, but they can''t dodge the spread-widening effects of protectionism.

As always in finance, the ''uncorrelated asset'' narrative works great—until bankers need an excuse for their hedges failing. Crypto''s real test? Proving it''s more than just a geopolitical pressure valve for the 1%.

Bitcoin lags Ethereum

On the 11th of June, BTC ETFs saw $164.5 million in daily inflows. On the contrary, ETH ETFs recorded $240.3M, underscoring outperformance on the institutional front.

In fact, ETH ETFs have enjoyed a strong inflow streak since mid-May, unlike BTC. 

Source: Soso Value 

Interestingly, the remarkable performance fronted a bullish breakout for the ETH/BTC ratio, an indicator tracking ETH’s relative price performance to BTC.

Put differently, ETH appeared to be in a great position to surpass BTC in investor returns in the NEAR term. 

Source: ETH/BTC ratio, TradingView

In early May, ETH outperformed BTC by about 40%, as shown by the ETH/BTC ratio rallying from 0.01 to 0.02. It consolidated afterwards, forming a bull pennant pattern. 

A textbook breakout from the formation could extend the ETH/BTC run to 0.03. This WOULD mean an extra 28% ETH rally against BTC or $3.15K price target for ETH. 

Such a scenario would be great for the altcoin sector if the bitcoin dominance also declines. However, after the U.S.-China trade deal, some macro tailwind would be tariff wars against other countries and the Israel-Iran tensions. 

Over the past two days, 25 Delta Skew has dropped, underscoring rising demand for puts (bearish bets, hedging) over calls (bullish bets). 

Notably, the Skew for the 7-day and 30-day tenors declined from nearly +2 to -1, indicating increased demand for short-dated BTC puts amid Middle East tensions. 

Source: Deribit 

Overall, the Q2 recovery has lifted BTC and ETH amid easing macro pressure. But the renewed Israel-Iran tension could spoil the summer party for bulls.