Trakx Weekly Update: Iran Escalation Rattles Investors

Key Crypto Market Figures

CTIs Weekly Performance

Digital assets prices sold off sharply last week as investors reacted to the latest developments in the Iran conflict (see below). As a result, none of the Trakx CTI indices finished the week in positive territory. Our flagship large cap Top10 Crypto CTI, declined by almost 6%. The best performer, posting a flat return over the past seven days, was the BTC Momentum CTI, while the worst performer was the typically higher-beta Meme CTI, after it dropped just shy of 11%.

Strait Of Hormuz Threats

The primary catalyst behind the pull-back in digital asset prices was President Trump’s announcement on Saturday that, unless Iran moved to reopen the Strait of Hormuz within 48 hours (Trump announced a five day extension earlier today), the US would “obliterate” Iran’s power plants. This marks a significant shift in policy, as US airstrikes to date have avoided critical civilian infrastructure. However, with crude oil prices surging—Brent briefly approached $110 per barrel—the urgency to reopen this key shipping route, through which 20% of global crude supply pass, has intensified. In response, Iranian leadership warned that any US escalation would trigger retaliation targeting energy (including nuclear facilities) and water infrastructure across the Gulf Cooperation Council (GCC), the latter is particularly concerning given the region’s heavy reliance on desalination for freshwater. Markets reacted swiftly to the dramatic escalation in geopolitical tension with both tradfi and crypto assets selling off sharply as investor risk appetite collapsed, as reflected in the Fear & Greed Index dropping back to single digits.

Fed On Hold

Geopolitics was not the only crypto negative event last week. At last week’s FOMC meeting, Fed officials left the target funds rate unchanged at 3.5-75%, as widely expected. While the accompanying dot-plot, which shows the expectations of how the individual members of the board expect the target rate to evolve over the next two years, suggested a cut was still on the cards later in the year at the press conference Chair Powell struck a notably cautious tone. He stated that progress on inflation was still the baseline forecast, but that it would not be as much as previously hoped. The challenge facing the central bankers (not just in the US, but globally) is how to deal with the surge in energy prices because it constitutes a negative supply shock that unhelpfully boosts inflation while simultaneously crimping economic growth.

Underscoring the challenging macro conditions in the US, February’s PPI report showed producer prices increased 0.7% in February, double consensus expectations. This signals mounting pipeline inflation even before the latest energy shock fully feeds through, news that unsettled both tradfi and crypto investors, and contributed to wiping out all the gains made earlier in the week.

SEC Crypto Clarity

Amid all the negativity, there was one positive development for digital asset markets. The SEC released an interpretive guidance for classifying crypto tokens, ending the regulatory uncertainty that plagued the industry under the SEC’s former head Gary Gensler. The guidance introduced a structured “token taxonomy,” categorizing crypto assets into groups such as digital commodities, digital collectibles, digital tools, stablecoins, and digital securities, with only the latter explicitly subject to securities regulation. This means that most major tokens, such as Ethereum, Solana, Cardano, Dogecoin, Avalanche, XRP, and Chainlink as classed as digital commodities. This is beneficial because it imposes less of a regulatory burden than securities, which under US law carry strict requirements like registration, disclosure, and ongoing reporting. Additionally, SEC Chair Paul Atkins signalled openness to complementary measures such as “safe harbor” frameworks and startup exemptions, indicating that this guidance is part of a larger shift toward a more tailored and flexible regulatory regime for the crypto sector.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Crypto, stocks fall as oil whipsaws after Iran vows response to Trump threat: Cointelegraph
• Bitcoin price drops to $70k as hot PPI data and Powell speech cast doubts over rate cuts: Crypto.news
• U.S. SEC issues first-ever definitions for what crypto assets are securities: CoinDesk
• UK lawmakers urge ‘immediate ban’ on crypto political donations: The Block
• Hyperliquid’s S&P 500 market quickly hits $100m in just one day: DLNews
• Google warns over 200 million iPhone crypto wallets at risk: Protos

Trakx News

• Last week, Trakx published a blog post examining Larry Fink’s (boss of tradfi giant BlackRock) transformation from Bitcoin skeptic to digital asset cheerleader.

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.

Trakx is a global fintech company creating new standards for digital asset investments. Through our trading platform, we offer thematic Crypto Tradable Indices (CTIs) and customised solutions, providing sophisticated investors with a high degree of compliance, custody and liquidity.

TRAKX SAS,  10 rue de Penthièvre, Paris, 75008, FRANCE – French société par actions simplifiée Paris Trade and Companies Register number 850 626 078

Crypto Asset Service Provider (CASP) Registered with the Autorité des Marchés Financiers (AMF) under number E2021-020

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.