The main shift that will reshape financial markets for the foreseeable future is the conflict between the US and Iran. This turned out to be not a short-term military event as the US is moving troops for a ground operation. It’s hard to estimate the effects for all instruments, but prices of crude oil futures have held above $100, and that boosts inflation expectations around the world.
The immediate reaction by bond markets to this escalation was the growth of US 30-year Treasury yields and the “flight to safety” regime across all markets. According to CME FedWatch, rates in the US are expected to stay unchanged until the end of the year.
Probabilities of interest rate for December 2026. Source: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.htmlThe full impact of the closure of the Strait of Hormuz on global trade is yet to be determined, but the risks of cascade effects in different markets are increasing.
Macroeconomic indicators
Have we seen any tectonic shifts in terms of macroeconomic indicators in Q1 2026? We can construct the picture out of three major benchmarks – the NFP indicator (payroll employment), CPI (consumer inflation) and manufacturing PMI (from the Institute of Supply Management).
Payroll employment has shown some slowdown in February, which might not be necessarily a sign of economic slowdown yet, as recessional signals need more time to develop, i.e. two or three consecutive quarters. For now, it might be perceived as seasonal volatility.
Non-farm payrolls change. Source: bls.govThe US PMI indicator showed good momentum in January and February, fueled by fiscal stimulus in the US and accompanied by a rally for industrial stocks. Generally, the PMI indicator above 50 displays a robust state of the economy and, in normal conditions, correlates with positive performance for the S&P 500.
Nowadays, given extreme fear in markets, the divergence between indices and PMI might hold for an extended period.
US PMI indicator. Source: https://tradingeconomics.com/united-states/manufacturing-pmiBitcoin
Current conditions
Bitcoin is no longer trending clearly in either direction but a phase of consolidation following a failed attempt to push higher. Price action reflects this shift clearly, as Bitcoin rallied toward $76,000 before experiencing a two-leg correction down to $67,000, eventually stabilising around $70,000, which in itself signals a loss of momentum and a move toward a more balanced, rangebound structure.
Underlying indicators across spot, derivatives, and on-chain activity suggest that both demand and supply are adjusting, with neither side currently strong enough to dominate, resulting in a market defined by caution, reduced participation, and early signs of stabilisation rather than expansion.
Demand
Demand has softened materially, particularly within spot markets, where declining volume and a sharp drop in ETF inflows indicate that the strong buying pressure seen previously has faded significantly. ETFs’ net inflows collapsed from over $790 million to just $150 million within a week, while trading activity also declined, reflecting a clear pullback in institutional engagement and a broader cooling in participation.
Spot demand is the backbone of sustainable movements. Without it, any upward movement becomes increasingly dependent on thinner liquidity and short-term positioning rather than genuine accumulation. The current environment therefore reflects a market where buyers are still present, but less aggressive and more selective in deploying capital.
Source: glassnode.comDerivative activity reflecting defensive positioning
In derivative markets, the picture reinforces this cautious tone, as open interest has edged slightly lower, while cumulative volume delta (CVD) has flipped negative across both spot and perpetual futures, signalling a shift to sell-side aggression.
Although funding rates have moved back into positive, indicating a modest rebuilding of long exposure, this shift is not strong enough to signal conviction but suggests that traders are cautiously re-entering positions without committing aggressively. This combination of reduced leverage, defensive positioning, and mixed sentiment creates an environment where movements are more likely to be reactive and unstable.
Options market signalling cautious sentiment
The options market further confirms the lack of confidence, as volatility remains subdued and open interest is largely unchanged, pointing to stable but unenthusiastic participation. The increase in delta skew indicates a growing demand for downside protection, meaning that even as panic has not escalated, traders are actively hedging against potential declines.
This behaviour reflects a market that is not fearful, but clearly not confident either, where participants are willing to stay engaged but are simultaneously protecting themselves against downside risk.
Source: glassnode.comOn-chain demand remains subdued
On-chain activity adds another layer, showing weak network participation, declining volume, and generally low throughput, all of which point to a lack of strong organic demand. While active addresses have increased slightly, overall activity remains below normal, reinforcing the idea that the market is operating with limited engagement from both retail and institutions.
Taken together, these signals confirm that demand is not absent, but it is clearly insufficient to drive a sustained trend, leaving the market vulnerable to short-term fluctuations rather than long-term directional moves.
Supply
There are increasing signs that sell pressure has started to re-emerge, particularly in the short term, as evidenced by the sharp reversal in CVD across both spot and derivative markets, which indicates that sellers have regained some control after a period of relative balance.
This shift does not yet represent aggressive distribution at scale, but it does signal that the market is no longer supported by dominant buy-side flows, which increases the likelihood of continued consolidation or further downside if demand does not improve.
Long-term holders anchoring market structure
Despite short-term selling pressure, the broader supply structure remains relatively stable, as long-term holders continue to dominate the market, while the share of short-term and highly reactive capital remains subdued. The slight decline in the short-term holder to long-term holder supply ratio, combined with low levels of “hot capital,” suggests that the market is still largely controlled by more patient investors rather than speculative participants.
This dynamic provides a degree of underlying support, as long-term holders are typically less sensitive to short-term movements and less likely to sell aggressively during periods of volatility.
Source: glassnode.comSentiment remaining in fear
Sentiment from the Fear and Greed Index was mostly unchanged in the first quarter of 2026, with fear dominating overall. This sentiment is clearly shown on the daily chart of Bitcoin, where the price has remained rather muted, trading in a sideways channel for the past couple of months. The anticipation of the Fed holding rates steady at its next meetings in the upcoming quarter remains, and this could be somewhat affecting sentiment for Bitcoin. According to CME FedWatch, the probabilities for the next meetings in April and June are to keep rates unchanged, with over 90% chance in both cases.
Source: Fear & Greed IndexTechnical view
The price of Bitcoin declined rather aggressively in mid January, losing around 24% in a single month before settling in a sideways range between $65,000 and $75,000 for the past two months. The stochastic oscillator signals oversold while the moving averages validate the overall downtrend. Bollinger Bands are contracted, showing that volatility is low. These point to a continuation of the current consolidation with no major hints of an uptrend going into the second quarter.
The opinions in this article are personal to the writers: they do not represent the opinions of Exness. This is not a recommendation to trade.
