Last weekend, the U.S. military strikes against Iranian targets shocked global markets, and Bitcoin experienced classic volatility characterized by a "kill the longs first, then squeeze the shorts" pattern. After a massive liquidation of leveraged positions and extreme panic that turned funding rates negative, prices surprisingly rebounded, recovering key technical levels. This Middle Eastern conflict has left the market with thoughtful structural clues.
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Review of the Middle Eastern Conflict: Panic Selling → Leverage Cleaning → Short Squeeze Reversal
As news of the conflict escalation broke, traders quickly entered risk-off mode, with many leveraged traders betting on further declines, amassing large short positions. However, the downtrend did not persist. As spot buyers stepped in and prices stabilized, these overcrowded short positions were forced to cover, triggering a classic short squeeze.
The result was:
- Market leverage fell to multi-week lows.
- Funding rates turned positive from negative.
- Prices recovered key zone levels.
- Open interest declined significantly, indicating that excessive leverage had been cleared.
When prices rise while open interest declines, it typically reflects short covering rather than speculative euphoria.
Technical Structure: Recovery of $65,600, Potential Bottom Emerging
On the technical front, Bitcoin has regained the $65,600 range and has recovered the 7-day moving average (a short-term momentum indicator). Although not all technical signals have been fully reset, the overall pattern indicates a potential bottom structure rather than a continuation of the downtrend.
This development aligns with the view that "geopolitical risks may have already been priced in." Prior to the military strikes, the market was likely pricing in a high probability of conflict escalation before the end of March. When expected events ultimately occur, the market sometimes reacts with a "bad news priced in" response rather than continued panic.
Coinbase Premium: Return of U.S. Spot Buyers
Another noteworthy development is the reappearance of the Bitcoin premium on Coinbase. Historical experience shows that when Bitcoin trades at a slight premium on Coinbase compared to other exchanges, it indicates strong spot buying from the U.S. This is often viewed as a bullish signal during recovery phases.
At the same time, funding rates remain low compared to past rally phases, indicating that the market is not yet overheated due to long leverage.
Short-Term Outlook: Volatility Still High, Structure Becoming Healthier
In the short term, volatility may remain elevated. If tensions escalate further, the possibility of testing lower support levels cannot be ruled out. However, the overall structure suggests that Bitcoin may be forming a bottom rather than preparing for another round of collapse.
Key questions for traders include:
- Will leverage rebuild quickly or remain under control?
- Can Bitcoin hold the recently reclaimed support level?
- How will global markets react after Monday's opening?
If support holds and leverage remains moderate, the likelihood of gradually challenging higher levels will increase.
Long-Term Perspective: Accumulation Range or Beginning of a Bear Market?
From a longer-term perspective, the current levels may represent an accumulation area rather than the start of a new bear market. The cleansing of shorts, the resetting of funding rates, and the decline in open interest have cleared a significant amount of excess speculation. Historical experience shows that Bitcoin often initiates sustainable recoveries after similar leverage resets.
Conclusion: Resilient Signals After the Stress Test
The market turmoil triggered by the Middle Eastern conflict ultimately served as a stress test rather than the start of a collapse. Bitcoin's resilience—demonstrated through the short squeeze, reappearance of premiums, and leverage resets—provides an unexpectedly constructive signal for the short-term market. Of course, the cryptocurrency's sensitivity to macro headlines will not disappear, but at least in this round of testing, the market structure has shown stronger absorption capacity than expected.
