Sophia’s Thoughts on an Evolving Market
The markets rebounded dramatically coming out of the weekend on news of a cease-fire in the Middle East. What does this mean going forward and what else is happening beneath the surface?
These are Sophia's Thoughts:
A temporary ceasefire between Israel and Iran helped Bitcoin rebound above USD 106,000, lifting risk assets across the board.
Rate cut expectations surged, oil prices plunged, and high-beta assets like Bitcoin mirrored the Nasdaq’s rally as inflation fears eased.
The Fed’s removal of “reputational risk” oversight and the SEC’s retreat from broad enforcement point to a more permissive regulatory environment for crypto.
🚀 Last week’s market performance
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🕛 What happened last week?
Crypto markets rebounded this week following a temporary easing of geopolitical tensions in the Middle East. Over the weekend, Bitcoin (BTC) dropped below USD 98,500 for the first time in over 40 days as conflict escalated between Israel and Iran. But by Monday, BTC surged past USD 106,000 as tensions started to alleviate, and continued rallying after the announcement of a “total ceasefire” between the two nations by President Trump. However, the announcement was premature. Since then, there have been ceasefire violations, but the market appears to be stable. Other risk assets followed the trend: the Nasdaq rose 1.5%, the S&P 500 climbed 1.1%, and oil prices plunged 13% in just 48 hours.
Traders and analysts alike responded to the shift. The Iran-Israel ceasefire sparked a swift surge in sentiment and liquidity into crypto markets. Swarm Markets co-founder Philipp Pieper added that the ceasefire has “meaningfully reduced immediate geopolitical risk,” triggering a broader rotation back into risk-on assets like crypto and semiconductors. Airline stocks rose sharply as energy costs fell, and major chipmakers like Nvidia and AMD each gained over 2% as investor risk appetite returned.
However, signs of fragility remain. During the height of the conflict, Bitcoin’s hashrate dropped by 8%, sparking speculation about potential disruptions to mining operations in Iran. While the exact source of the hashrate decline is unclear, it highlights how parts of crypto’s infrastructure remain exposed to real-world shocks. As Simon Peters, crypto analyst at eToro, put it, “it’s a fragile relief.”
The price recovery above USD 106,000 suggests that institutional interest in Bitcoin remains firm, even in a volatile macro backdrop. The ceasefire may have hit pause on geopolitical risk, but the coming weeks will test whether this reset has staying power—or whether the market remains one headline away from renewed volatility.
✈️ Macro tailwinds are building
Alongside geopolitical relief, macroeconomic conditions have shifted in favor of risk assets like crypto. Falling oil prices and fading inflation concerns are reinforcing expectations of monetary easing. According to the CME FedWatch Tool, the probability of a Federal Reserve rate cut by September has risen to 85%, up from 63% just one week ago. Meanwhile, the odds of the Fed holding rates steady through October dropped to 5.6%, reflecting growing market conviction that cuts are on the horizon.
These shifts are fueling renewed momentum in high-beta assets. The Nasdaq rose 1.5% this week, and Bitcoin’s recovery above USD 106,000 closely mirrored this broader risk-on rally. As Philipp Pieper observed, “We’re seeing Bitcoin respond accordingly, trading more like a high-beta tech asset than a hedge asset—, or at least in the short term.”
Meanwhile, brent crude oil dropped below pre-conflict levels, down more than 13% over two days, reinforcing investor sentiment that inflationary pressure is abating. UBS’s CIO Solita Marcelli wrote, “The market response to the escalation and subsequent ceasefire hopes aligns with our view that geopolitical shocks have tended to have a temporary impact on global financial markets.” She added that investors are likely to refocus on fundamentals, particularly rate policy and earnings.
Together, these dynamics are setting up a potentially favorable environment for crypto in the months ahead: reduced macro stress, rising rate cut odds, and increased investor risk appetite. But as Simon Peters warned, “Either side breaking the terms of the ceasefire could cause markets to retreat, unwinding the rally we’ve seen over the past 24 hours.” For now, crypto markets are climbing the wall of worry. How long the ascent lasts may depend on what comes next in Washington and abroad.
↗️ What comes next?
While macro and geopolitical conditions helped lift crypto markets this week, structural changes in regulation may have the most lasting impact. On June 23, the U.S. Federal Reserve formally removed “reputational risk” from its bank oversight protocols, stating that “reputational risk will no longer be a component of examination programs in its supervision of banks.” Reputational risk refers to the potential damage to a financial institution’s standing or public image based on the perception of its activities, including those related to digital assets. This move eases pressure on banks engaging with digital assets and is expected to facilitate renewed crypto exposure across traditional finance.
The Fed noted that it would train examiners to implement this shift consistently and work with other regulators to “promote consistent practices,” signaling a coordinated shift in tone. Already, several banks have resumed crypto-related product exploration, including ETF exposure and custody services.
This regulatory softening follows other recent developments. In late May, the SEC dropped its lawsuit against Binance and founder Changpeng Zhao—one of the last major enforcement actions still active against a centralized exchange. While the agency continues to pursue targeted cases, the trend appears to be moving toward selective enforcement rather than industry-wide crackdowns.
Taken together, the signals point toward a more permissive stance: lighter bank restrictions, reduced litigation pressure, and more institutional interest. But risks remain. As seen during the weekend’s volatility, crypto markets still respond sharply to global risk events.
Still, for now, the easing pressure from Washington is giving crypto some room to breathe. Whether that translates into sustained growth depends on how long the current geopolitical calm and monetary policy expectations hold.
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