Airstrikes Plunge Crypto

Daily Updates:

• Earlier today, Israel launched “pre-emptive” airstrikes against Iran’s nuclear and ballistic weapons sites and Iranian military targets, to which Iran has responded to with more than 100 drone missiles. 
• According to the US Secretary of State Marco Rubio, the US was “not involved” in Israel’s strikes, whose actions he described as being “unilateral”.
• The market entitled ‘Israel military action against Iran by Friday?’ on Polymarket had only priced in a 14.5% chance of Yes at 12:30AM UTC before quickly soaring to 100%. 

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• Oil surged as much as 13% before paring back some of those gains, while US equity futures are down -1.12%. 
• Investors have sought refuge in typical safe haven assets – gold prices have moved higher, up 1.04% on the day and currently trading at $3422/ oz. Additionally, despite much talk recently about market participants diversifying away from US treasuries, yields have dropped across the curve as US treasuries once again act as a port of safety.
• Yesterday, a closely-watched 30Y bond auction saw stronger-than-expected demand, drawing a yield of 4.844% (below the yield around the auction deadline) – a sign of solid appetite.

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• The reaction in crypto markets has been far stronger than in US equities so far – the major escalation in the region pushed BTC just under $103K (-2.3% over the past 24 hours), while ETH has fallen by a larger 7.9%, currently changing hands at $2,500. 
• Among the top 10 cryptocurrencies by market-cap, SOL has shed the most value, as it drops to $145 (-8.3%).
• Short-tenor BTC options saw a significant ten percentage point increase in volatility expectations to 42% after the airstrikes were reported. That has since abated to a lower 37%. Long-dated expiries for BTC on the other hand, appeared to have been largely unmoved by the escalations; the result is a continued upward sloping term structure of volatility, which only temporarily compressed. 

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• Volatility expectations for ETH saw a similar upward spike from 68% for the shortest-expiry of 7-days to 80%, but have remained close to those levels, unlike BTC. That in turn means ETH’s inverted volatility term structure contrasts BTC’s positive slope. 
• Shorter-dated volatility smiles for ETH have turned significantly bearish, with 7-day options holding a 5.32% volatility premium towards OTM puts – renewed demand for downside protection in an asset which only earlier this week had a call-skew upwards of 7% towards call options. We covered some of the catalysts driving that bullish sentiment change in ETH here. 
• ETH perpetual swap funding rates have also pared back from their highest levels since mid-January 2025, and now have shorts paying funding to longs (-0.003%). 
• US producer price inflation (PPI) was muted in May, with the producer price index rising 0.1% from a month earlier, below the expected 0.2% increase.
• Following the data release, President Trump said at a White House event yesterday “What’s going on here? Trump is proving to be right … we’ve taken in $88B in tariffs in two months, with no inflation”. He then made clear that he would like lower interest rates because “We have a lot of short-term debt … if he’d [Chair Powell] lower it by two points, we’d pay $600B a year less”. 
• Trump also said, “The fake news is saying, ‘Oh, if you fired him, it would be so bad, it would be so bad.’ I don’t know why it would be so bad, but I’m not going to fire him”, in reference to Chair Powell.

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• Solana treasury strategy-play DeFi Development Corp remains up over 110% over the last week and they have announced a $5B equity line (ELOC) secured via a share purchase agreement with RK Capital Management LLC to support its Solana accumulation strategy. This comes the day after having to retract its SEC filing to raise $1B equity. 

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• Tony G Co-Investment Holdings Ltd. (CSE: TONY) has completed the purchase of 10,387.685 HYPE tokens, the native asset of the HyperLiquid ecosystem.
• The acquisition, part of its long-term digital asset strategy, was made at an average price of US$42.24 per token, totaling US$438,828.46.

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• Coinbase has announced the launch of its credit card in partnership with American Express, launching in autumn 2025, exclusively for U.S. Coinbase One members.
• The card offers 2%–4% back in Bitcoin on purchases, with rewards increasing based on assets held on Coinbase, alongside Amex perks.

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• The SEC has officially withdrawn 14 regulatory proposals from the former SEC which were set to increase crypto-related restrictions, including the infamous rule 3b-16 notably halting which was set to broaden the “exchange” definition to include crypto exchanges and tighten custody standards for investors. 

This Week’s Calendar:

Charts of the Day:

Figure 1. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 2. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 3. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

Figure 4. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes