Trakx Weekly Update: Geopolitical Whiplash

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset markets delivered mixed performance last week as geopolitical tensions surrounding the US-Iran conflict continued to weigh on investor sentiment. Our benchmark large-cap Top10 Crypto CTI declined by almost 3%, while the RWA CTI emerged as the standout performer, gaining 6.3% over the period. At the other end of the leaderboard, the Lending CTI was the weakest performer, falling 10%.

Peace On, Peace Off

Optimism that the US-Iran conflict was nearing resolution faded rapidly last week. Hopes had initially risen after Iranian state media released a draft MoU on Wednesday outlining a possible framework for de-escalation. However, sentiment quickly deteriorated after the White House dismissed the document as a “complete fabrication”. Adding to the negative tone, President Trump reiterated during a televised Cabinet Meeting later that day that Iran would not receive sanctions relief in exchange for surrendering its stockpile of enriched uranium. He also made clear that the regime could not be allowed to possess a nuclear weapon. Combined with renewed US military strikes against Iranian targets following the interception of drones launched by the regime, these developments shattered investor confidence that a deal was imminent.

The sharp reversal in sentiment pushed the Crypto Fear and Greed Index back into extreme fear territory as a broader risk-off move swept across global asset markets. Crude oil prices also rebounded, partially retracing their earlier decline. Digital assets subsequently suffered one of their sharpest single-day sell-offs of the year, with the largest cryptocurrencies experiencing the heaviest declines. Bitcoin fell below $73,000, while Ethereum dropped through the $2,000 level for the first time since March. Total crypto liquidations reached approximately $934 million over a 24-hour period. Notably, Ethereum futures open interest reached a record high during the move, suggesting that the sell-off was not purely driven by bullish capitulation and that aggressive new positioning may also have been involved.

As the saying goes though, truth is often the first casualty of war — something clearly demonstrated by the chaotic nature of the current US-Iran negotiations. Consistent with the now familiar “peace on, peace off” pattern, reports emerged by Friday that both sides had “reached an agreement in principle” to extend the ceasefire, reopen the Strait of Hormuz within 30 days and begin formal negotiations on Iran’s nuclear programme — terms strikingly similar to those contained in the earlier “fabricated” MoU. All that reportedly remained was formal sign-off from the leaders of both countries. Having been repeatedly wrong-footed by previous negotiation headlines, however, crypto investors reacted cautiously to the latest supposedly “imminent” breakthrough, especially as four days later and nothing has been formally agreed between the two sides.

Prediction Market Controversy

Online prediction markets have grown rapidly in popularity in recent years, particularly among crypto-native investors who view them as a technologically superior tool for gauging sentiment on major geopolitical and economic events. Because participants must commit real capital to their forecasts, proponents argue that prediction market probabilities reflect genuine conviction rather than casual opinion — a characteristic often described as “skin in the game”. Their continuous 24/7 operation is viewed as another advantage, providing a real-time measure of crowd sentiment rather than the static snapshots produced by traditional polls and surveys.

Despite these merits, prediction markets remain highly controversial. Critics — including many policymakers — argue that relatively thin liquidity can leave prices vulnerable to manipulation by a small number of large participants. There have also been several high-profile cases involving unusually large and profitable trades, prompting accusations of insider trading and market abuse. These concerns are increasingly translating into regulatory scrutiny. Spain last week banned access to both Polymarket and Kalshi as a “precautionary measure” while authorities assess whether the platforms violate national gambling laws, following Indonesia’s earlier decision to ban Polymarket outright. The two moves add to a growing list of jurisdictions restricting access to online prediction markets.

In the US, however, picture looks very different. President Trump publicly backed the industry last week, posting on Truth Social that it was “critically important” for the CFTC to maintain “exclusive authority” over prediction markets. His position reflects a broader battle over whether prediction markets should be treated as financial instruments or online gambling platforms. If regulated as derivatives under the CFTC, operators such as Polymarket and Kalshi can potentially scale nationally under a single federal framework. If instead they are classified as gambling products, regulation would largely shift to individual US states, many of which could impose outright bans or severe restrictions. Maintaining CFTC oversight is therefore viewed by the industry as critical to the long-term viability and growth of prediction markets in the US.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin drops below $73,000 as U.S. strikes on Iran spark $1 billion liquidations: CoinDesk
• Trump: ‘Critically Important’ CFTC Maintains Exclusive Authority Over Prediction Markets: YahooFinance
• Spanish authorities block Polymarket and Kalshi over gambling laws: Cointelegraph
• Sui Network Goes Down for Second Straight Day as Weekly Token Slide Hits 20%: Decrypt
• NYSE parent ICE held multiple talks with Hyperliquid to evaluate onchain perps market, CEO says: The Block
• UK treats crypto network like a sanctioned bank after claims it processed $90B for Russia: CryptoSlate

Trakx News

• In his latest Monthly Update, Ryan Shea explores how the evolving US-Iran conflict is influencing digital asset markets and reshaping the longer-term outlook for crypto assets.

Trakx CTIs Performance

Sources: Coingecko and AlphaVantage

*Return of bitcoin is calculated since 01/05/2020, while CTIs performances were calculated since their respective launch date.
**Includes simulated performance.
***The risk signal is determined according to the historical volatility level, the higher the riskier.

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Disclaimers: No Investment Advice. Index returns and statistics are for illustration only. Index returns do not reflect any transaction costs or expenses. Past performance does not guarantee future results. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the newsletter content as such. Trakx.io does not recommend that any cryptocurrency should be bought, sold, or held by you. Readers shall conduct their own due diligence and consult their financial advisors before making any investment decisions.